Reval, a provider of risk management and hedge accounting solutions, has said that Bank of London and The Middle East (BLME), a London-based Sharia’a-compliant bank, has adopted Reval software-as-a-service (SaaS) solution to meet hedge accounting requirements.
The bank has deployed Reval in place of its original in-house application primarily for fair-value hedging of its large portfolio of bond-like instruments, called Sukuk, and for cash flow hedging of its portfolio of deposits.
Nigel Denison, executive director and head of markets at BLME, said: “As a leading Islamic wholesale bank with a sizeable leasing business, BLME prudently hedges its exposures to market interest rate volatility using products and structures that enable us to comply with the core tenets of Sharia’a. For example, we use profit rate swaps, which use reciprocal murabaha transactions to create an instrument with the risk management characteristics of a conventional interest rate swap.”
Mark Lynch, treasurer at BLME, said: “Part of the solution that is of significant benefit to BLME is the advanced regression methodologies that demonstrate the effectiveness of our Sharia’a-compliant hedges and qualify more hedges under IAS 39 accounting rules.”