CIMB : Islamic & PETRONAS sign an inaugural Tahawwut Master Agreement for Islamic commodity derivatives

5 March 2024

Kuala Lumpur: CIMB Islamic Bank Berhad ("CIMB Islamic") and PETRONAS today signed an inaugural Tahawwut Master Agreement ("TMA") for Shariah Compliant Commodity Derivatives. The signing of the TMA marks PETRONAS' venture towards Shariah-compliant derivatives, making PETRONAS the first corporation in Malaysia to utilise CIMB Islamic's Shariah-compliant commodity hedging instruments for Islamic Energy Commodity Derivative trades.

The TMA is a multiproduct framework agreement drafted by International Swaps Derivatives Association ("ISDA") in collaboration with International Islamic Financial Market ("IIFM") Association to govern Shariah-compliant derivative transactions. The TMA provides the market with globally accepted and standardised terms for Islamic hedging products, which will spur the growth of Islamic hedging products in the international market.

The agreement was formalised at a signing ceremony held at the PETRONAS Twin Towers today. CIMB was represented by Ahmad Shahriman Mohd Shariff, Chief Executive Officer of CIMB Islamic and Chu Kok Wei, Co-Chief Executive Officer, Group Wholesale Banking and Group Treasurer of CIMB Group, while PETRONAS were represented by Freida Amat, Vice President, Treasury, and Nik Mohsain Harjuda Nik Ahmad, Head of Group Commodities Exposure Management, Treasury.

Ahmad Shahriman said, "CIMB Islamic is proud to partner PETRONAS for this landmark Shariah-compliant commodity derivatives arrangement, contributing towards the development of Malaysia's International Islamic Financial Centre ("MIFC"), in line with Bank Negara Malaysia's Financial Sector Blueprint."

Chu Kok Wei added, "We are pleased to support PETRONAS, an entity symbolic to Malaysia as the national oil and gas company in meeting their ongoing business requirements. The partnership with PETRONAS under the TMA is indeed timely given the robust growth and increasing demand for Shariah-compliant instruments in the market today. The TMA will certainly pave the way for PETRONAS to manage its future hedging transactions and we continue to be on the lookout to foster more synergetic collaborations with other corporate clients in the future to continue invigorate this attractive segment."

Freida said that the TMA undertaking demonstrates PETRONAS' support in advancing the development of Shariah Compliant Derivatives, both domestically and globally. She added, "The usage of derivatives under the TMA will enable PETRONAS to manage our exposures in a Shariah-compliant manner. We remain supportive of the growth of the Islamic finance industry and we believe that this partnership can advocate for more Islamic financial solutions in the future."

CIMB has been playing an active role in driving the growth of Islamic and sustainable finance. The adoption of a global acceptable master agreement bodes well with the development of Malaysia as an international marketplace for Islamic finance and in line with the Group's Forward23+ strategic plan. Over the past three years, CIMB has executed several significant sustainable financing transactions, including its landmark sustainability-linked derivative ("SLD") in October 2021, the world's first Malaysian Ringgit denominated SLD transaction. In 2023, the Group tripled its sustainable finance target to RM100 billion by 2024 after having met its initial target of RM30 billion two years ahead of schedule.

PETRONAS also invests in Islamic-related products and have issued Sukuk and Islamic financing facilities.

At the signing ceremony between CIMB Islamic and PETRONAS for the inaugural Tahawwut Master Agreement for Shariah Compliant Commodity Derivatives were (L-R) Nik Mohsain Harjuda Nik Ahmad, Head of Group Commodities Exposure Management, Treasury of PETRONAS; Freida Amat, Vice President, Treasury of PETRONAS; Ahmad Shahriman Mohd Shariff, Chief Executive Officer of CIMB Islamic and Ina Hasniza Ibrahim, Regional Head, Corporate & Commercial Sales and Regional Islamic Treasurer of CIMB Group.