4.107 Insured deposits. Deposit guarantee is a way to ensure that depositors (usually with a predefined limit) recover all or part of their deposit balances in liquidated DCs. Credit guarantees on loans and bonds are similar to deposit guarantees. An insured bond and a loan subject to a third-party guarantee can be distinguished on the basis of institutional provisions and the way assets are hedged. Deposit guarantees are usually provided by an institutional unit41 – the insurance agency – that specializes in the insurance of many categories of DC debt. On the other hand, credit guarantees apply to a portfolio of individual loans or loans (or to a particular group of securities). Loans subject to credit guarantees are a way to ensure that creditors (primarily central governments and corporate lenders) are covered by a borrower or issuer of securities in the event of default. 4.243 The following section describes procedures in monetary statistics when all IMF accounts are recorded in the balance sheets of central banks. The statistical treatment of fund accounts for countries where positions and transactions with the Fund are shared between the central bank and the government will then be examined. 4.238 In response to the global financial crisis, the IMF recently adopted (2009 and 2011 respectively) new rules in the form of credit lines such as the Flexible Line of Credit (FCL) and the Precautionary and Liquidity Line (PLL). THE FCL agreements apply to countries with very strong bases, guidelines and balance sheets in the implementation of policies and are approved for countries that meet qualification criteria set at the request of the Member State. PLL DE agreements apply to countries with strong foundations and guidelines that face moderate weaknesses and may not meet FCL qualification standards. The crisis financing instrument has been put in place to replace and expand the scope of previous emergency assistance measures.
4.157 The value of a derivative is the result of the price of a basic item: the reference price. The reference price may relate to a commodity, financial asset, interest rate, exchange rate, other derivative or a difference between two prices. The derivative contract may also refer to an index or a basket of prices. No capital amount will be advanced to be repaid and there will be no capital income. Financial derivatives are used for a number of purposes, including risk management, hedging, market arbitrage and speculation. The valuation of financial derivatives is included in Chapter 5. 4.257 The Islamic financial system refers to a financial system or financial activity that respects the principles of Sharia law.