This research aims to compare the regulatory capital instruments for Islamic banking institutions (IBIs) - in particular the qualifying Additional Tier 1 (AT1) capital instruments - as defined by Basel III, Bank Negara Malaysia (BNM) and IFSB-15 (issued by the Islamic Financial Services Board). Principally, the research examines the Shari'ah issues, especially related to subordination, arising in equity-based contracts when used for structuring AT1 capital instruments. In particular, it examines the mudarabah sukuk issued by the Abu Dhabi Islamic Bank (ADIB) in 2012. The study finds that the most appropriate Shari'ah contract that would be suitable for structuring AT1 capital instruments would be musharakah. The present study is considered an original attempt in examining an under-researched topic relating to Basel III and its Shari'ah perspective. The study will be an important reference point to Islamic banks when structuring AT1 capital instruments.

Wealth in the Gulf Cooperation Council (GCC) has mostly been fuelled by oil and gas revenues. These petrodollar flows have been increasing over the long term particularly with the rising oil prices. Based on average crude oil prices of USD 70 per barrel, it is estimated that the amount of oil revenue profits of the six GCC states - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) - will tripple over the next 14 years (Farrell, 2005). How the GCC deploys this increasing wealth is of high interest to the world. Historically, the GCC has relied on the financial markets of the United States and Europe to manage their investments.

The financial re-engineering of old concepts is a new trend in the field of Islamic finance. It has been termed as 'New Horizon 2.0' by Shinsuke (2014) - an approach which aims to revitalize original instruments once practiced in medieval Islam to harness the potential of Islamic finance to better meet the needs of communities. It is also in line with the continuous innovative efforts of the industry to apply existing concepts, contracts, and instruments that are Shari'ah-compliant in the modern context to resolve contemporary socio-economic issues. In light of this background, this chapter examines how the age-old philanthropic concept of waqf has been integrated in the Islamic finance industry to revive its applications in contemporary societies. The chapter focuses on the inter-links between waqf and the Islamic capital market (ICM). Accordingly, it examines the new trends of waqf that have emerged in the ICM.

The book presents the various aspects of the theory of Islamic capital markets (ICM) and its operations by starting with the simplest ideas and moving on to the complex applied issues. The topics covered include: an overview of ICM and its development; Shari'ah principles, contracts and issues; regulatory and governance frameworks; risk management, accounting and taxation issues; details on different segments of the ICM, including sukuk, Shari'ah-compliant stocks, Islamic fund management, Islamic private equity and venture capital, Islamic derivatives and Islamic structures investment products; and future directions for the ICM.

Islamic finance operates under varied legal and regulatory frameworks in various jurisdictions that reflect differing regulatory approaches to the introduction and supervision of Islamic banks. This seems logical if viewed from the perspective that the countries where Islamic banks operate are not at the same level of development; some are advanced, a few have just embarked on their journey of introducing Islamic banking and finance, while others are somewhere in the middle. Thus, one should naturally expect that reaching a certain level of consensus in regulating and supervising Islamic banks will take considerable time. The current research looks into one area of contention in Islamic banking regulation. It explores the different types of Islamic banking structures that prevail in general while it specifically evaluates subsidiary Islamic banks of conventional banks versus full-fledged Islamic banking structures. The advantages and disadvantages of both structures are discussed, followed by an evaluation of the unique challenges posed by the combination of these two in the context of Malaysia.

Saudi Arabia is one of the largest Islamic finance markets in the world and therefore holds a position of special importance in the study of Islamic finance as well as in the study of shari'ah governance in Islamic financial institutions (IFIs). Saudi Arabia is the largest Islamic banking market in the Gulf Cooperation Council (GCC) by market share; its Islamic banking assets accounted for 51.5 per cent of the domestic banking sector as at 2Q2017. Globally, Saudi Arabia ranked second after Iran among twelve jurisdictions where Islamic banking is systematically important. It accounted for 20.4 per cent of global Islamic banking assets in 2017 as compared to Iran, which accounted for 34.4 per cent. Even in the development of other segments of Islamic finance, Saudi Arabia holds a significant position. It ia active in the sukuk market, with its issuances - including those by the Islamic Development Bank (IsDB) - representing 33 per cent of total global issuances in 2017, thus ranking after Malaysia, which registered 38 per cent of total issuances. Saudi Arabia also accounted for 37 per cent of total Islamic funds in 2017, while 32 per cent of Islamic funds were domiciled in Malaysia. Moreover, it is the largest takaful market registering 38 per cent of global takaful contributions, followed by Iran (34 per cent), Malaysia (7 per cent) and the United Arab Emirates (6 per cent).

The sukuk market is one of the fastest growing sectors in Islamic finance, with total sukuk outstanding valued at more than USD330 billion in the first quarter of 2016. The industry has witnessed evolution in the issuance of landmark and innovative structures: ranging from plain vanilla to more complex and hybrid structures such as convertible and exchangeable sukuk that allow investors to tap into the equity of reference companies; from short- to medium- to long-term and perpetual sukuk to meet the funding requirements of issuers; and from sovereign to corporate and retail sukuk to cater to the appetites of different classes of issuers and investors. Recently, more sukuk have been structured as a subordinated instrument to meet the regulatory capital requirement of Islamic banks and as a sustainable and responsible investment (SRI) tool to promote socially responsible financing and investment. Regardless of the technical and commercial features of sukuk, all structures must comply with the Shari'ah requirements, particularly those of underlying assets that back the issuance. This article narrates the dynamics of fiqhi opinions on sukuk assets based on the historical timeline of issuance starting from the first corporate sukuk by Shell MDS Malaysia in 1990 until the current development.

Basel III has redefined the criteria for qualifying regulatory capital instruments. Banks have to maintain Common Equity Tier 1 (CET1) capital of at least 4.5% of Risk-Weighted Assets (RWA) and Tier 1 (T1) capital should be at least 6% of RWA at all times, while total capital (i.e., Tier 1 plus Tier 2) must be at least 8% of RWA at all times. T1 capital will absorb losses during going-concern - a situation where the bank is still solvent and continuing operation. Tier 2 (T2), on the other hand, refers to gone-concern capital, which will absorb further losses when the bank is facing financial distress and reaches the point of non-viability.

Basel III has redefined the criteria for regulatory capital instruments. Accordingly, Islamic banking institutions (IBIs) have to consider the issuance of instruments that would meet both the objectives of Basel III and Shari'ah requirements. This research particularly aims to compare the regulatory requirements for issuing Tier-2 (T2) capital instruments as defined by Basel III, Bank Negara Malaysia (BNM) and IFSB-15. In this regard, the research examines the Shari'ah issues related to subordination and conversion arising in exchange-based contracts (such as murabahah and ijarah sukuk) and equity-based contracts (such as mudarabah and wakalah sukuk). The study relies on library research to collect secondary data in the form of classical works of Islamic jurisprudence, analyses such work and links it with the present day regulatory requirements. The study finds that there are Shari'ah concerns over the use of exchange-based contracts. However, the use of convertible mudarabah and wakalah sukuk could be justified.