Trust, Exim banks to issue subordinated bonds

Trust Bank and Exim Bank – both listed on the capital market – have decided to issue subordinated bonds worth Tk500 crore and Tk300 crore, respectively, to strengthen the capital base of their portfolios.

Both private sector lenders now require approval from their primary regulator, the Bangladesh Bank, and then the Bangladesh Securities and Exchange Commission.

Trust Bank Limited's 7th bond will be fully redeemable, non-convertible, unsecured, and subordinate. The bank was listed on the bourses in 2007, and its shares closed at Tk25.70 each on the Dhaka Stock Exchange on Wednesday.

The tenure of the EXIM 6th Subordinated Bond has been set at seven years, to be implemented after receiving approval from both regulators. The bank was listed on the bourses in 2004, and its shares closed at Tk7.90 each on the DSE today.

Government financial institutions, mutual funds, banks, insurance companies, organisations, trusts, corporations, and local institutional investors can buy the units of both bonds through a private placement.

Currently, the local bond market is dominated by subordinated bonds, mainly issued by banks. These bonds help lenders build their mandatory Tier-II capital base through the bond proceeds within a specific tenure.

The Bangladesh Bank is implementing Basel III in the local banking industry to ensure banks have adequate capital to avert systemic risk. 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.