AAOIFI delays Standard 62 rollout amid growing concerns over its appeal to markets

The planned overhaul to sukuk Standard 62 has been put on ice after investors warned the move could disrupt a USD 1 tn market, Bloomberg reports, citing Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Secretary General Omar Mustafa Ansari. “A strict implementation would materially change the nature of sukuk from being bond-like to becoming more akin to asset-backed securities,” Amol Shitole, head of fixed income at Mashreq Capital, told Bloomberg.

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Back to the drawing board: “We have put it on hold,” Ansari said, adding that at least one more consultation round with central banks, major issuers, rating firms, and lawyers will take place before a final decision on Standard 62 is made.

SOUND SMART- Standard 62 would require sukuk issuers to formally transfer ownership of underlying assets to investors — a shift AAOIFI scholars say is needed to ensure structures reflect true Shariah-compliant asset ownership, rather than the bond-like cash flows common in today’s market. “Sukuk can never be a conventional bond,” Ansari said, adding that “anybody who wants a pure bond should go to the conventional market.”

The possible update would safeguard against default: AAOIFI argues that in a truly asset-backed structure, investors would be able to take over or liquidate assets more swiftly in the event of default — a central question in the ongoing debate. Discussions are now focused on structuring sukuk so that regular cashflows resemble debt-like instruments, while default situations trigger equity-like characteristics.

Industry concerns remain significant. “This shift could have significant consequences,” Shitole said, citing variable income, greater complexity, and reduced liquidity that could weigh on demand. Rating agencies and investors also warn that such a move would complicate risk assessment and could mean that sukuk may no longer qualify for fixed-income portfolios.

Not likely to sit well with sovereign issuers: Mehdi Popotte, senior sukuk portfolio manager at Arqaam Capital, pointed to three challenges. First, that some issuers — particularly sovereigns — may be unwilling to transfer assets. Second, that investors might shift toward non-AAOIFI-compliant sukuk, creating a fragmented market. Third, that AAOIFI does not maintain official records of which sukuk meet its standards.

MARKETS THIS MORNING-

Asian markets are trading higher this morning after Nvidia’s earnings eased concerns about the AI bubble bursting. The Nikkei is up 3.2%, with the Kospi trailing behind, up 2.7%. The Shanghai Composite is looking at more moderate gains, while the Hang Seng is flat.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.9% yesterday on turnover of SAR 3.6 bn. The index is down 8.6% YTD.

In the green: Oasis (+5.3%), Alarabia (+4.8%) and MIS (+4.5%).

In the red: Taprco (-5.5%), Taiba (-5.2%) and Retal (-4.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.2% yesterday on turnover of SAR 16.0 mn. The index is down 24.1% YTD.

In the green: SPC (+7.1%), Almuneef (+5.2%), and Riyal (+4.9%).

In the red: Horizon Food (-13.2%), Bena (-9.2%), and Food Gate (-8.7%).

CORPORATE ACTIONS-

Qassim Cement Company's board greenlit a SAR 87.8 mn dividend distribution at SAR 0.8 per share for 3Q 2025, the firm said in a disclosure to Tadawul yesterday. The distribution date is set for Sunday, 28 December.

United Carton Industries’ board approved the distribution of SAR 40 mn in dividends for 9M 2025 at SAR 1 per share, the firm said in a disclosure to Tadawul yesterday. The distribution is scheduled for Tuesday, 16 December.