A type of sukuk structure in which sukuk certificates give sukuk holders residual claim over the assets financed by their funds. This claim ranks after the claims of other creditors and unrestricted profit sharing investment accounts (UPSIA). Contrary to the conventional sense of subordination, subordinated sukuk do not represent creditor claims that rank after those of other creditors as this would be inconsistent with shari’ah principles and precepts.
Subordinated sukuk allow Islamic banks to strengthen their Tier 2 capital.
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