Additional Tier 1 sukuk
Mudarabah sukuk issued by an Islamic bank that count as Additional Tier One capital because they absorb losses and pay discretionary profit.
Additional Tier One sukuk are sukuk issued by an Islamic bank, or its consolidated subsidiaries, that meet the IFSB's criteria to count as Additional Tier One regulatory capital. The IFSB's capital adequacy standard describes mudarabah sukuk whose proceeds are invested in the bank's general asset pool alongside common equity, so that holders absorb losses on a going-concern basis, and it requires the distribution of profit to be discretionary, with non-distribution not counting as a default event. Holders keep recourse to the bank where losses result from its negligence, misconduct or breach.
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This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.