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Recent awards for two Kuwaiti transactions put the distinction between funding, regulatory capital and sustainable finance back in focus.
Two Kuwait bank transactions recognised at an Islamic finance awards ceremony in September offer a useful view of how differently sukuk can function, even when they share the same broad label. One was a $300 million Tier 2 issue by Kuwait International Bank. The other was an $850 million Additional Tier 1 issue by Kuwait Finance House. Together they raised $1.15 billion, but they occupied different positions in their issuers’ capital structures.
ASAR – Al Ruwayeh & Partners, which advised on Kuwait-law aspects of both transactions, reported three IFN Deals of the Year awards on 23 September. The awards, for the 2025 programme, were presented in Dubai on 22 September 2026. KIB’s transaction received the regulatory and Kuwait deal awards; KFH’s received the Mudarabah award.
The distinction matters beyond an awards list. A bank can issue securities to obtain funding, to strengthen qualifying regulatory capital, or to support a defined allocation of proceeds. Those objectives can overlap, but they are not interchangeable. Understanding which purpose an instrument serves is essential to interpreting the transaction.
Two transactions, different positions
KFH announced its $850 million issue in November 2025, reporting orders above $1.7 billion and an annual yield of 6.25%. It described the transaction as a means of strengthening its capital base and diversifying funding. The bank also reported participation from investors in the Middle East, Europe and Asia.
Those figures describe the size, pricing and initial demand for one transaction. They do not establish what happened to the securities in subsequent trading, or how much additional financing the bank ultimately extended because of the issue. An order book is evidence of investor interest during execution, rather than a measure of the projects subsequently funded.
KIB’s transaction had another configuration. Akin, which advised the bank, described $300 million of Tier 2 sustainable trust certificates due in 2036, issued under a $1.5 billion programme. Its announcement said proceeds would be allocated to eligible projects under KIB’s sustainable-finance framework. It also reported an order book exceeding $2 billion.
The sustainable designation concerns the use of proceeds and the relevant framework. Tier 2 describes the instrument’s capital classification. Treating these as separate features helps avoid a common analytical mistake: assuming an environmental or social label determines the holder’s position in the bank’s capital hierarchy.
What the capital labels mean
The Basel framework’s eligibility criteria distinguish Additional Tier 1 from Tier 2 capital. Additional Tier 1 instruments must be perpetual and satisfy specified conditions, including subordination and loss-absorption requirements. Tier 2 is a separate category with its own qualifying criteria. Domestic implementation and each instrument’s contractual terms remain important.
This is why a yield cannot be considered in isolation. Two certificates from banks operating in the same country can expose investors to different payment, redemption and loss-absorption arrangements. A comparison that starts and ends with the annual return leaves out the structure that helps explain that return.
A possible call date also needs to be distinguished from a contractual maturity. In broad terms, an issuer’s opportunity to redeem an instrument is not the same as a promise that it will be repaid then. For a perpetual instrument, that distinction is fundamental to understanding the time horizon. The offering documentation, rather than a short promotional summary, is the reference point.
The work behind an international issue
The disclosed transactions involved banks, arrangers and advisers working across more than one legal system. ASAR’s role was specifically Kuwait-law advice. Akin’s KIB announcement identified a Cayman issuing vehicle and a London listing, illustrating why an international transaction cannot be reduced to a single domestic approval or one contract.
That combination makes the allocation of legal responsibilities significant. An issuer, a special-purpose vehicle and the institutions distributing an issue do not perform the same function. Nor does identifying a law firm as an adviser mean that firm guarantees an investor’s return. The public announcements describe work on transactions; the securities’ terms define the investment.
For a business reader, the useful question is therefore what the financing changes on the issuer’s side of the balance sheet. Capital eligibility, permitted uses of proceeds and payment obligations each answer a different part of that question. The headline amount alone answers only how much was issued.
Beyond the awards cycle
The wider industry has also focused on the infrastructure supporting sukuk. In its 2025 financial-stability forum, the Islamic Financial Services Board highlighted deeper local-currency markets, a broader investor base and legal and regulatory infrastructure among the priorities for the sector.
Those priorities point to a different measure of development from the number of trophies awarded. A market’s usefulness depends in part on the range of financing structures available and on whether their characteristics can be understood and compared. International execution is one dimension; clarity about the instrument is another.
The September recognition brings the two Kuwaiti issues back into view after their 2025 execution. Their more lasting relevance lies in the difference between them: $850 million of Additional Tier 1 capital and $300 million of Tier 2 sustainable financing, each carrying a distinct set of purposes and contractual features.
The distinction also helps readers compare announcements that use the same sukuk label for instruments serving different purposes.
