3 banks to raise Tk1,400 crore through bonds

Three banks got the final approval from the Bangladesh Securities and Exchange Commission (BSEC) to issue perpetual bonds to strengthen their additional tier-1 capital base in line with the Basel III capital adequacy requirements.

The City Bank and Trust Bank will issue the bonds worth Tk 400 crore each while the First Security Islami Bank will issue Tk 600 crore, said Dhaka Stock Exchange in a post on its website on Thursday.

A perpetual bond is a fixed income security with no maturity date and is often considered as a type of equity rather than debt. These types of bonds are not redeemable but instead provide a never-ending stream of interest payments. The perpetual bonds will be unsecured and feature a floating rate.

Basel III requires each bank to maintain total tier-1 capital of at least 8.5 percent of their risk weighted assets. Of the 8.5 percent, 4.5 percent must be capital from common shares, 1.5 percent from equity or debts with perpetual nature, and 2.5 percent must be the bank's buffer capital.

The market regulator started to receive applications from commercial banks that seek to issue perpetual bonds to meet the Basel III capital adequacy requirements. The banks also need approval from the Bangladesh Bank for the issuance of bonds.

To make the secondary market viable for bond trading in stock exchanges, the BSEC already made it mandatory for all banks to list perpetual bonds.