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Private sector commercial bank, Bank Asia decided to issue floating rate subordinated bonds worth Tk 8 billion to raise regulatory capital.
The board of directors of the company approved the issuance of Seven-year Floating Rate Non-Convertible Subordinated Bond, according to a stock market filing on Wednesday.
Now, the bank will have to wait for the approval of the central bank and the capital market regulatory authority.
Subordinated debt (debenture) is a loan or security that ranks below other loans or securities when it comes to settling claims on assets or earnings.
The lender will sell the bonds through private placement, with a maturity period of seven years. The debt securities are intended to strengthen the bank's Tier - II capital base.
The term Tier-2 capital refers to one of the components of a bank's required reserves. It is designated as the second or supplementary layer of a bank's capital and is composed of items such as revaluation reserves, hybrid instruments, and subordinated term debt. It is considered less secure than Tier 1 capital.
The lender will issue the redeemable, floating rate, non-convertible, unsecured subordinated bonds to fulfill the requirement of Basel III.
Basel III is a set of reform measures intended to improve regulation, supervision, and risk management in the global banking sector.
According to the 2023 financial statement, the bank has already issued subordinated bonds worth Tk 7.68 billion.
The listed commercial bank showed a profit of Tk 3.05 billion in 2022. It paid 15 per cent cash dividends for the year.
Bank Asias's profit dropped 23 per cent year-on-year to Tk 2.48 billion in 2023 and declared 15 per cent cash dividends for the year.
Meanwhile, the stock traded at Tk 17.40 per share on the Dhaka Stock Exchange on Wednesday, unchanged from the day before.