Three private commercial lenders--One Bank, Brac Bank and Dutch-Bangla Bank Limited--have received regulatory approval to raise a hefty fund worth Tk 1,600 crore from the capital market through bonds aimed at strengthening their capital base.
The Bangladesh Securities and Exchange Commission (BSEC), the securities regulator, gave approval to the lenders’ bond proposals at a meeting held at Agargaon office on Tuesday with its Chairman Shibli Rubayat Ul Islam in the chair.
As per the regulatory approval, One Bank Limited would issue a non-convertible, unsecured, fully redeemable, floating rate, subordinated bond to raise funds worth Tk 400 crore.
The bank would utilise the funds to cement its tier-2 capital base, the BSEC said in a press release. The funds would be raised through private placements with a unit price of Tk 10 lakh each.
Financial institutions, insurance companies, corporate bodies, asset management companies, mutual funds, and high net-worth individuals are allowed to purchase the bond units through private placements.
Green Delta Capital would act as the trustee of the bond while UCB Investment would be the arranger of the bond. The bond would be traded on the alternative trading board (ATB) of the stock exchanges.
At the same meeting, the commission also approved the issuance of Brac Bank’s non-convertible, fully redeemable, coupon bearing, floating rate, and subordinated bond worth Tk 700 crore.
The bank would issue the bond to strengthen its Tier-2 capital base. Per-unit price of the bond has been fixed at Tk 10 lakh for private placement holders.
The BSEC also asked the company to get listed on the alternative trading board (ATB) of the bourses.
UCB Investment would act as the trustee of the bond while Brac EPL Investments would act as the arranger of the bond.
Besides, the BSEC approved the Dutch-Bank Bank Limited’s fourth subordinated bond with fully redeemable, non-convertible and unsecured bond of Tk 500 crore.
The bond fund would be raised through private placements to institutional investors and high net-worth individual investors, as per the BSEC statement. The face value of per unit of the bond would be Tk 1 crore.
The bank would cement its Tier-II capital base with the funds to be raised through the bond.
Sena Kalyan Insurance Company is acting as the trustee for the bond and Prime Bank Investment would act as arranger. The bond would be listed on the bourse’s alternative trading board.
According to the Financial Stability Report of Bangladesh Bank, Bangladesh’s banks’ Capital Adequacy Ratio (CAR) is the lowest among the South Asian countries.
So, banks collect funds by issuing bonds to increase their capital. As part of this, three banks got approval from BSEC to collect funds.
It is noted that the capital situation of Bangladeshi banks has been the lowest in South Asia for several years.
Since 2017, the country's banks' CAR is sometimes increasing and sometimes decreasing.
In 2017, the CAR of Bangladeshi banks was 10.8 per cent. The next year this ratio decreased to 10.5 per cent but in 2019 it increased again to 11.6 per cent. In 2021, it stood at 11.08 per cent, which again increased to 11.83 per cent in 2022.