United Commercial Bank (UCB), one of the largest private-sector lenders in Bangladesh, wants to float another perpetual bond worth Tk500 crore to strengthen its capital base.
The board of directors of the publicly listed commercial bank on Sunday also announced plans to form a subsidiary company in Singapore for remittance business.
Both the plans are subject to necessary consents from relevant regulators, the bank said.
UCB's 2nd Perpetual Bond will be an unsecured, non-cumulative bond without any tenure. But, in certain circumstances, the bond may be recalled by the issuer with regulatory approval.
Also, in cases of equity shortfall, the bank can convert part of the bonds into its equity.
Due to its perpetual nature, the central bank treats perpetual bonds as banks' additional Tier-I capital, while the Tier-I capital consists of equity.
Equity is what a company owes to its shareholders.
Bangladeshi banks, following their Tier-II capital base strengthening through issuing subordinated bonds for years, are strengthening their next level capital, the Tier-I and Additional Tier-I, as required by Basel- III.
The regulators in 2020 and 2021 allowed many banks to issue perpetual bonds worth several hundred crores of taka each.
The Bangladesh Securities and Exchange Commission (BSEC) is compelling the banks to make the bonds tradable on the bourses.
UCB issued its first perpetual bond worth Tk400 crore last year.