Banking & Finance Glossary—A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The leading Islamic international autonomous not-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shari’ah standards for Islamic Financial Institutions (IFIs) and the global Islamic finance industry. Established in Bahrain in 1991, it is supported by a number of institutional members from over 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing firms, and legal firms. Its standards are currently followed by the leading Islamic financial institutions across the world and have introduced a progressive degree of harmonisation of international Islamic finance practices. It also offers professional qualification programs (notably Certified Islamic Professional Accountant (CIPA), the Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance program) in efforts to enhance the industry’s human resources base and governance structures. For further details, see Practice Note: Key participants in the Islamic finance industry — Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration refers to the taking of a formal step by the agent on the instructions of the majority lenders following an event of default such as demand for early repayment of the loan. For further information, see Practice Note: Events of default for more information. Accordion feature/accordion facility An accordion, or incremental debt feature, refers to a mechanism in the facilities agreement under which, provided certain conditions are met such
Banking & Finance Glossary—C Capex The term capex is used to refer to capital expenditure. Capital expenditure may be subject to a limit in the facilities agreement. For more information, see Practice Note: Leveraged finance—financial covenants. Capital adequacy Capital adequacy ratios are used to determine a credit institution’s capacity to meet liabilities and other risks. A credit institution’s capital acts as a cushion for potential losses and protects depositors or other lenders. Capital market A market for securities which includes the stock market (equity securities) and the bond market (debt). Capitalisation of interest Where interest is added to the principal amount of a loan to be paid at the same time as the principal. This contrasts with cash interest which is paid by the borrower at regular intervals throughout the life of the loan. For further information, see Practice Note: Interest—reference rates and margin. Cash flow insolvency This is where the Debtor cannot pay debts as they fall due (see IA 1986, s 123(1)(e)). Cash leakage Cash leakage in a leveraged finance context is used to refer to a situation where cash, which could be used as working capital by the business or used to meet finance commitments, leaves the obligor group. Most leveraged acquisitions are made on the basis of the cashflow of the business rather than asset value meaning that keeping cash within the business is important to preserve value. As a result, a leveraged finance facilities agreement
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