Malaysia's Bank Islam, wholly-owned by BIMB Holdings, has set up a one billion ringgit ($307 million) subordinated Islamic bond programme, the latest Asian bank to use the structure to boost regulatory capital.

With Basel III global banking standards being phased in around the globe, several Islamic banks have issued subordinated instruments, including those in Turkey, Pakistan, Saudi Arabia and the UAE.

Bank Islam will use an investment partnership structure known as murabaha for its sukuk, which will be classified as Tier 2 capital on its balance sheet, according to a filing by rating agency RAM Ratings.

In June, sources said the bank was planning such a programme, aiming to raise 400m ringgit in 2015 for a potential acquisition in Indonesia and an additional 300m ringgit in 2016 to fund organic growth.

Bank Islam is Malaysia's oldest and largest full-fledged Islamic lender, but it is smaller than the Islamic banking units of rivals Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd.

The two lenders earn up to a third of their income from Indonesia, a market seeing rapid corporate loan growth and a regulatory push to develop Islamic finance. In contrast, Bank Islam earns all of its income at home where it holds a 16 per cent share of Islamic deposits.-Reuters