Saudi Hollandi Bank has completed a SR1.4bn ($373m) sukuk (Islamic bond) issue that will be used to boost the company’s Tier 2 capital.

The seven-year sukuk, completed through a private placement with investors, pays investors 115 basis points above the six month Saudi interbank offered rate (Sibor) and after the fifth year Saudi Hollandi can buy back the sukuk.

Tier 2 capital is used to cushion against future losses and new international banking regulations in the wake of the global financial crisis require banks to have a higher capital adequacy ratio, leading many other financial institutions to raise more Tier 2 capital.