BSEC removes banks’ perpetual bond complications
The decision came at a special meeting on Wednesday
Responding to a Bangladesh Bank request, the capital market regulator has withdrawn the condition of mandatory interest payments from the approval letters of eight banks' perpetual bonds.
The Bangladesh Securities and Exchange Commission (BSEC) decided this at a special meeting on Wednesday.
Banks are issuing perpetual bonds to strengthen their Additional Tier-I capital base to comply with the Basel III guidelines, a standard of banks' capital sufficiency.
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The BSEC – in its approval letters to eight banks – had earlier made interest payments to investors mandatory.
On the other hand, the Bangladesh Bank definition of Additional Tier-I capital complying securities does not include one against which interest payment is mandatory.
Owing to this, the central bank had disagreed to treat the proceeds of the perpetual bonds as Additional Tier-I capital until the mandatory interest payment clause was removed from the approval letters concerned.
A BSEC official told The Business Standard, "We responded very promptly so that the banks can clear their way to issue perpetual bonds by Thursday – a deadline for them."
