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Gulf banks join regulatory capital party 

April 7, 2015

Sudip Roy, Reuters

Middle Eastern banks are taking advantage of cheap borrowing costs to optimise their capital structure even though countries in the region have yet to fully implement Basel III rules.

National Bank of Kuwait priced a US$700m 5.75% perpetual non-call six-year inaugural Additional Tier 1 bond on Wednesday, becoming the latest bank in the region to sell this type of instrument.

That banks from the region are accumulating capital is surprising at first glance given the strength of their ratios. NBK has a Core Tier 1 ratio of 13.3% under Basel III, while the average Tier 1 ratio for GCC peers ex-UAE stood at 15.7% as at December 31.

But just like some of the strongest Western European banks that don't need capital, AT1 offers other advantages.

"One of the key rationales is capital optimization and proactive capital management," said Kapil Damani, capital solutions, debt capital markets at BNP Paribas.

Read more: Reuters

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