(Adds details, context)
SINGAPORE Feb 13 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
"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
Since 2012, Islamic banks in the Gulf have been more active
in using sukuk issues to boost their capital because of Basel
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)