Shahjalal Islami Bank to raise Tk 6 billion through subordinated bond

Shahjalal Islami Bank Plc has announced plans to raise Tk 6 billion through its fourth Mudaraba subordinated bond to strengthen its capital base in line with Basel-III compliance, as per Bangladesh Bank’s December 2014 guidelines on risk-based capital adequacy

The proposed bond issuance is subject to approval from the relevant regulatory authorities – Bangladesh Bank and the Bangladesh Securities and Exchange Commission, according to a stock exchange filing on Thursday.

The bond will have a tenure of seven years and will be fully redeemable, unsecured, non-convertible, and floating rate in nature.

A subordinated bond is an unsecured loan or bond that ranks below other, more senior loans or securities with respect to claims on assets or earnings. Subordinated bonds are thus also known as junior securities.

Subordinated bonds, also known as junior securities, are unsecured debt instruments that rank below senior obligations in terms of claims on assets or earnings.

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 on hand.

As per Bangladesh Bank’s Basel III guidelines, each bank must hold capital equivalent to 10 per cent of its risk-weighted assets or Tk 5 billion, whichever is higher. Failure to meet this requirement is considered a capital shortfall.

Listed in 2007, the private lender’s stock price fell 1.2 per cent to Tk 16.5 after two hours of trading on Thursday at the Dhaka Stock Exchange.

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