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The board of directors of Dutch-Bangla Bank PLC has approved the issuance of a fifth subordinated bond worth Tk 12 billion to strengthen the regulatory capital base.
In a stock exchange filing on Thursday, the private commercial bank said, the purpose of this bond is to increase the Tier 2 capital to meet capital requirement under Basel III and to strengthen the regulatory capital base of the bank.
Basel III is an international regulatory accord that introduced a set of reforms designed to mitigate risk within the international banking sector by requiring banks to maintain proper leverage ratios and keep certain levels of reserve capital in hand.
The Bangladesh Bank is implementing Basel III in the local banking industry so that banks have adequate capital to avert a systematic risk.
A subordinated bond is a type of bond where the bondholder is at the bottom of the repayment hierarchy if the borrowing company faces bankruptcy.
The bond issuance decision was taken at its board meeting on Wednesday.
The nature of the instrument is a fully redeemable, unsecured, non-convertible, subordinated bond that will be issued through private placement.
The tenure of the bond will be seven years, including a two-year grace period, subject to the approval of the Bangladesh Securities and Exchange Commission and the Bangladesh Bank.
The board also decided that any subsequent changes in the features of the bond, if deemed necessary by the bank or required by regulatory authorities, shall be placed for approval of the board of directors of the bank.
Each share of the bank, which was listed on the Dhaka bourse in 2001, remained stuck at floor at Tk 59.10 in the past eight months.
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