BSEC to relax listing rules for perpetual bonds

The stock market regulator has decided to waive the existing rules regarding the direct listing procedure at the stock market to facilitate the trading of the perpetual bonds.

Sources said the Bangladesh Securities and Exchange Commission (BSEC) took the initiative as it wants to introduce new products at the capital market.

Previously, the perpetual bonds were issued through private placement and they were not tradable at the stock market. So, the authority needs to waive the rules to make it tradable at the stock exchange.

Sources further said the regulator has already discussed the matter with the Dhaka Stock Exchange (DSE) and directed it to submit a report on the sections of the listing procedure that need to be relaxed for this purpose.

The DSE is supposed to submit the report by 9 May. On the basis of the stock exchange's report, the commission will consider relaxing the rules for the perpetual bonds.

Earlier, in July last year, the BSEC decided that all the perpetual bonds issued by banks must be tradable on the main board of a local bourse.

Perpetual bonds, debt securities without maturity, are gaining momentum in Bangladesh as a large number of commercial banks are on their way to strengthening the Tier-I capital base to comply with Basel III guidelines.

Tier-I capital consists of equity and perpetual debt securities, which are deemed to be similar to equity in nature.

After that, in March this year, the Bangladesh Bank and the BSEC in a meeting decided that perpetual bonds issued by the banks must be listed on the stock exchanges within 30 days of their subscription closure.

Since mid-2020 to now, the commercial banks have begun to get regulatory approval for perpetual bonds and nine banks are collecting Tk4,100 crore in total through the newly popularised instrument.

The City Bank Ltd has already arranged the closure ceremony of the first-ever Basel-III complying perpetual bond in the country.

And, the others are set to follow through while many more such bonds are in the pipeline.

The City Bank Capital Resources Limited, the investment banking subsidiary of The City Bank, is working as the mandated lead arranger of all nine perpetual bonds.

Bangladeshi banks have flooded the primary bond market with redeemable corporate bonds over the last decade as those helped them strengthen their Tier-II capital base.

But as the bonds barely took to the stock exchanges for listing, those were privately placed mainly among other banks and the concentration did not help to uphold the idea of diversifying the investor base and creating a vibrant secondary market for bonds.

However, as perpetual bonds have no maturity, investors need their freedom to exit when they need it, and listing is now set to offer convenience.

The capital market's hunger for tradable debt securities will also be catered through the perpetual bonds' listing.

"We are trying to introduce various products in the capital market to diversify it and to attract investors," said Professor Dr Shaikh Shamsuddin Ahmed, a commissioner of the BSEC.

"Perpetual bond is an important instrument for the investors and we want to make it tradable at the stock market. So, we are going to facilitate the process to list them at the stock market," he added.