Basel III Creates New Opportunities for Sukuk (Islamic Bond) Issuance

18 Pages Posted: 6 Sep 2014

See all articles by Bedi Lackmann

Bedi Lackmann

Nomura Institute of Capital Markets Research

Date Written: 2014

Abstract

We think Basel III and the rules proposed by the IFSB based on Basel III will affect the global sukuk (Islamic bond) market as follows:

1. The possibility of increased domestic and international issuance by Islamic banks of sukuk that can be counted toward capital so as to meet the increase in capital adequacy ratios relative to Basel II.

2. The possibility of an increase in the issuance of sukuk by highly rated governments and companies aimed at meeting the increased demand for investing in investment-grade sukuk from Islamic banks trying to meet Basel III liquidity requirements.

3. The possibility of a decline in the cost of sukuk issuance via standardization made possible by legislative (including tax law) and regulatory reform in Islamic and non-Islamic countries aimed at facilitating sukuk issuance.

Keywords: Sukuk, Islamic bond, Islamic finance, Islamic banks, liquidity, Basel, IFSB

JEL Classification: E52, F34, F42, G28

Suggested Citation

Lackmann, Bedi, Basel III Creates New Opportunities for Sukuk (Islamic Bond) Issuance (2014). Nomura Journal of Capital Markets, Vol. 6, No. 1, 2014, Available at SSRN: https://ssrn.com/abstract=2492021

Bedi Lackmann (Contact Author)

Nomura Institute of Capital Markets Research ( email )

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