IFR Asia

Islamic banks likely to issue more AT1 debt – S&P

slamic banks in the Gulf and elsewhere could increase their issuance of Additional Tier 1 sukuk over the next two years to support growth, according to an analyst at Standard & Poor’s. Gulf nations including Saudi Arabia, Kuwait, Qatar and the UAE are at different stages of implementing Basel III guidelines, giving Islamic banks an additional incentive to strengthen their capital buffers. Most Islamic banks are well capitalised, but there are still compelling reasons to issue capital in the near future, according to S&P. Several bonds have already been issued that the issuers said were compliant with Basel III regulations. One of the key recommendations is that any instrument must contain elements of loss absorption to comply with Basel III.

India mulls Islamic banking stimulus

India is preparing legislation to promote Islamic banking as a way to make its financial markets more inclusive and provide new capital-raising opportunities to companies. India’s Ministry of Finance has formed an internal committee to study the prospects for Islamic banking. Sources said the ministry is talking to the Reserve Bank of India and the Securities and Exchange Board of India about introducing rules to streamline sukuk issuance by Indian entities, among other regulatory amendments. Although Islamic banking is not new to India, its services have not prospered. Existing regulation is prohibitive and there is a general lack of awareness about the benefits of Sharia-compliant finance. Sukuk could help close the US$300bn funding gap for the infrastructure sector.

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