KUALA LUMPUR (March 5): Petroliam Nasional Bhd (Petronas) and CIMB Islamic Bank Bhd have signed an inaugural Tahawwut Master Agreement (TMA) for shariah-compliant commodity derivatives.

The TMA is a multi-product framework agreement drafted by the International Swaps and Derivatives Association in collaboration with the International Islamic Financial Market Association, the Petronas group said in a statement on Tuesday.  

According to the group, the TMA provides the market with globally accepted and standardised terms for Islamic hedging products, which is expected to spur the growth of Islamic hedging products in the international market.

The formalisation of the agreement took place at the Petronas Twin Towers, in the presence of CIMB Islamic chief executive officer Ahmad Shahriman Mohd Shariff and Petronas vice president (treasury) Freida Amat, along with other high-ranking representatives from both groups.

Ahmad Shahriman expressed pride in partnering with Petronas in the landmark shariah-compliant commodity derivatives arrangement. He said that the TMA contributes to the development of Malaysia’s International Islamic Financial Centre, aligning with Bank Negara Malaysia’s Financial Sector Blueprint.

CIMB added that the adoption of the globally acceptable master agreement bodes well with Malaysia’s position as an international marketplace for Islamic finance, as it is also in line with the banking group’s Forward23+ plan.

Over the past three years, CIMB has executed several significant sustainable financing transactions, including its landmark sustainability-linked derivatives in October 2021.

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.  

CIMB Group co-chief executive officer and group wholesale banking and group treasurer Chu Kok Wei said the partnership with Petronas was indeed timely given the robust growth and current increasing demand for shariah-compliant instruments in the market.

"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 to invigorate this attractive segment,” Chu added.

Freida emphasised that the TMA undertaking demonstrates Petronas’ commitment to advancing the development of Shariah-Compliant Derivatives, both domestically and globally.

“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 innovations,” she added.