UPDATE 1-Malaysia's AmIslamic plans region's first Basel III sukuk
(Adds details, context)
SINGAPORE Feb 13 (Reuters) - AMMB Holdings , Malaysia's fifth largest lender, said its sharia-compliant unit would issue up to 3 billion ringgit ($903 million) of Islamic bonds, the first sukuk from East Asia structured to meet the capital requirements of Basel III.
AmIslamic's sukuk will fund working capital and boost Tier 2 capital reserves at the bank, AMMB said in a statement. The sukuk will use the murabaha format, a common Islamic structure, and have tenors of at least five years, it added without specifying when issues might occur.
Banks around the world will face larger capital requirements under Basel III standards that are being phased in over a period of several years.
Conventional banks in Malaysia have already begun issuing Basel III bonds; last September, CIMB Group Holdings sold a 750 million ringgit bond to raise Tier 2 capital.
The country's Islamic banks have not yet done so, partly because they are not now in urgent need of additional capital, bankers say. But the AmIslamic sukuk could help to start a trend.
"With Basel III regulation on capital components coming into effect early last year, we expect more issuances of Basel III-compliant sukuk in the Malaysian debt capital market," Kuala Lumpur-based RAM Ratings said.
AmIslamic's sukuk received regulatory approval from Malaysia's central bank and securities commission this week. RAM assigned a preliminary long-term rating of AA3 to the sukuk programme, citing the company's "strategic importance" to the AMMB group.
Since 2012, Islamic banks in the Gulf have been more active in using sukuk issues to boost their capital because of Basel III.
Saudi Hollandi Bank is among Saudi Arabian banks which have raised Tier 2 capital with sukuk, while in November 2012 Abu Dhabi Islamic Bank issued a hybrid sukuk, one with equity-like characteristics, to boost its Tier 1 capital. Dubai Islamic Bank sold a similar $1 billion instrument in March 2013. ($1 = 3.3235 Malaysian ringgit) (Reporting by Al-Zaquan Amer Hamzah; Editing by Andrew Torchia)
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