Saudi Arabia’s first Basel III AT1 sukuk explained

Author: Lizzie Meager | Published: 9 Jul 2015

The National Commercial Bank (NCB) is the first bank in Saudi Arabia to issue an additional tier 1 (AT1) capital Basel III-compliant perpetual sukuk.

The privately-placed sukuk took on a mudaraba structure, with the issuer and investor entering into a form of partnership, then together investing in shariah-compliant products.

Although this is a first for the kingdom, counsel on the deal are confident that it won’t be the last.

"Banks in the region have started to look beyond traditional sources of funding and capital such as deposits and ordinary shares, and towards more diversified platforms, including AT1 capital," said Jonathan Fried, partner at Linklaters who advised on the deal.

Fried explained that there are various factors at play, including the sliding price of oil,...