---
title: "What is Additional Tier 1 sukuk? | IslamicOpenFinance™"
description: "Mudarabah sukuk issued by an Islamic bank that count as Additional Tier One capital because they absorb losses and pay discretionary profit."
url: https://islamicopenfinance.com/glossary/additional-tier-one-sukuk/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Prudential regulation](https://islamicopenfinance.com/glossary/#prudential)

Prudential regulation

# 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.

## Sources

- [IFSB-23 Revised Capital Adequacy Standard (Banking Segment), 2021: Additional Tier 1 capital, criteria for sukuk](https://www.ifsb.org/wp-content/uploads/2023/10/IFSB-23_En.pdf)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Capital adequacy (Islamic banks)** Holding enough capital against risks; for Islamic banks, the IFSB adapts the Basel rules to each Shariah contract.](https://islamicopenfinance.com/glossary/capital-adequacy/) [**Sukuk al-mudarabah** Sukuk whose proceeds are capital in a mudarabah managed by the issuer; used by some Islamic banks to raise regulatory capital.](https://islamicopenfinance.com/glossary/sukuk-al-mudarabah/) [**Mudarabah** A partnership of capital and work: profit is shared by an agreed ratio, while financial loss falls on the capital provider.](https://islamicopenfinance.com/glossary/mudarabah/) [**Ta'addi and taqsir (misconduct and negligence)** Misconduct and negligence: the two grounds that make a trustee, agent or mudarib liable for a loss it would otherwise not bear.](https://islamicopenfinance.com/glossary/taaddi-and-taqsir/)

**Prudential regulation**

1. [Capital adequacy (Islamic banks)](https://islamicopenfinance.com/glossary/capital-adequacy/)
2. [Displaced commercial risk](https://islamicopenfinance.com/glossary/displaced-commercial-risk/)
3. [Profit equalisation reserve](https://islamicopenfinance.com/glossary/profit-equalisation-reserve/)
4. [Investment risk reserve](https://islamicopenfinance.com/glossary/investment-risk-reserve/)
5. [Alpha factor](https://islamicopenfinance.com/glossary/alpha-factor/)
6. [Islamic deposit insurance](https://islamicopenfinance.com/glossary/islamic-deposit-insurance/)
7. [Rate of return risk](https://islamicopenfinance.com/glossary/rate-of-return-risk/)
8. [Fiduciary risk](https://islamicopenfinance.com/glossary/fiduciary-risk/)

[All 221 terms](https://islamicopenfinance.com/glossary/)