The securities regulator has removed the mandatory condition of keeping provision by issuers of perpetual bonds.
The Bangladesh Securities and Exchange Commission (BSEC) earlier set a condition of keeping provision by issuers of perpetual bonds to remove apprehension regarding non-payment of interest or coupon to the bondholders.
In its fresh directive issued on Wednesday, the securities regulator deleted the condition.
Mohammad Rezaul Karim, a BSEC executive director, said according to the central bank some provisions set in the rules of perpetual bonds contradict with the central bank's rules on tier-I capital.
"So, the condition of keeping provision by the issuers of the perpetual bonds has been excluded," Mr. Karim said.
Asked, whether investors' interest to perpetual bonds will decline following such decision, Mr. Karim said the bond holders' confidence may decline a little bit at this.
"There is no record of liquidation of any bank in the country. So, there is no apprehension of non-payment of interest or coupon of perpetual bonds," said Mr. Karim, adding that the banks' investment capacity will be enhanced through the capital raised under tier-I requirement.
As per a previous directive issued on May 23, 2021, every issuer of perpetual bond shall, in each year, make at least 20 per cent of provision in addition to annual interest or coupon payment of its perpetual bond, which shall be accumulated.
The provision also reads: if there is any shortage of fund or profit for the year to make any payment of such interest or coupon, the issuer of perpetual bond shall make payment of due interest or coupon in full using fund from the accumulated coupon or provision account.
An insider said on anonymity that the banks will be benefitted through the exclusion of condition regarding keeping provision.
"But, the condition could reduce the apprehension regarding non-payments of interest or coupon," he said.
In its fresh directive, the securities regulator has also extended the listing period of perpetual bonds, issued by 11 banks, to 180 market days from previous 90 market days.
Those 11 banks earlier allowed for raising an aggregate amount of fund worth Tk 51 billion.
The banks are Jamuna Bank, The City Bank, One Bank, Mutual Trust Bank, Standard Bank, NCC Bank, Social Islami Bank, First Securities Islami Bank, Trust Bank, United Commercial Bank, and EXIM Bank.
