Bankruptcy Resolution Systems across Most Islamic finance Markets Remain at Infancy: Fitch Ratings

Fitch Ratings (Fitch) has stated that bankruptcy resolution systems in major Sukuk-issuing markets remain in general, at early stages of development, with the COVID-19 pandemic making the need for more effective resolution regimes more pressing.

Whilst many of these jurisdictions have updated their bankruptcy laws in recent times, the effects of these laws in practice are yet to be witnessed. According to Fitch, key areas that need to be developed include better protection of rights for bond and Sukuk-holders, as well as having recovery prospects made more predictable.

Sukuk are generally similar, in terms of their economic effect, to conventional bonds and therefore resemble debt...