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Farmers Bank Limited (FBL) that saw a management shakeup recently is getting a Tk 5.0-billion bailout to enhance its capital to a universally-accepted benchmark.
The central bank gave permission Monday to the recast FBL management to float subordinated bonds worth the amount (Tk 5.0 billion).
"We've given permission on issuance of the bonds to the bank to help in strengthening their capital base in line with Basel-III framework," a senior official of the Bangladesh Bank (BB) told the FE.
He said the bonds will also help the bank resolve its capital-related problem. "The bank is allowed to use the money from the sales of bonds for its own necessity."
The BB's latest initiative to give the kiss of life came against the backdrop of higher credit growth than deposit that created liquidity problem for the fourth-generation private commercial bank.
The bank's advance-deposit ratio, generally known as ADR, has been crossed 85 per cent for several months, which contravenes central bank's rules, according to the BB officials.
The central bank of Bangladesh had earlier set the safe limit of ADR at 85 per cent for conventional banks and at 90 per cent for shariah-based Islamic banks.
Talking to the FE, another BB official said individuals and corporate entities are now key buyers of such bonds under private placements.
Currently, some banks are set to float such bonds to meet capital requirement under the Basel-III framework and to strengthen their regulatory capital base.
The subordinated bonds will be treated as tier-II capital under the Basel-III benchmark, according to the BB officials.
The central bank started implementation of the Basel-III framework on July 2014. It will be implemented fully by January 2020, they added.
Basel-III is a new global regulatory standard on banks' capital adequacy and liquidity as agreed by the members of the Basel Committee on Banking Supervision.
The third of the Basel Accords was developed in response to deficiencies in financial regulation revealed by the financial crisis in the late 2000s.
The Basel-III is set to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and bank leverage.