BRPD Circular No. 05: Investment in Bond/Debentures

Ref No.: BRPD Circular No. 05
Banking Regulation and Policy Department
Bangladesh Bank
Head Office
Dhaka.
05 April, 2017
BRPD Circular No.-05 Date: ---------------------- 22 Chaitra, 1423 Managing Director / Chief Executive All Scheduled Banks operating in Bangladesh Dear Sir, With reference to the subject cited above, we draw your attention to BRPD Circular No. 01 issued on 28 January, 2008. Regarding investment in Bond/Debentures. Through the aforementioned circular, instructions were provided that a bank-company may invest up to a maximum of 10% of its total capital (Total Capital as determined in accordance with BRPD Circulars) in the bonds or debentures of any company. To bring this decision in line with the newly added Section-26C of the Banking Company (Amendment) Act, 2013, it has been decided that the following percentages shall be followed in the case of investment by any bank-company in the bonds/debentures of any other company:
a) A bank-company shall not invest in the bonds or debentures of any one company more than five percent of the total amount of its paid-up capital, share premium, statutory reserves, and retained earnings; b) The relevant bond/debenture must be approved by the Bangladesh Securities and Exchange Commission; c) The credit rating of the bond/debenture issuing company must be conducted by a Credit Rating Agency (CRA) approved by Bangladesh Bank. In this regard, the credit rating of the bond/debenture issuing company must be at least '2' (two) for the long-term (more than one year) and at least 'T2' for the short-term (up to one year) in accordance with the guidelines issued by Bangladesh Bank on Total Capital Adequacy; and d) In the case of investment by any bank-company in the bonds/debentures of any company, the instructions regarding Credit Risk Weighting contained in BRPD Circular No. 02 issued on 16 January, 2014 shall apply. However, the instructions contained in this circular shall not apply to investment in sub-debt instruments issued by any bank-company (which are not listed on the stock exchange and are considered as capital of the bank). If the amount of any bond/debenture held by any bank on the date of issuance of this circular exceeds the limit specified in paragraph 'a' above, it may be held until maturity. However, upon maturity, the investment in bond/debenture through cash settlement shall be restricted within five percent. BRPD Circular No. 01; dated 28 January, 2008 is hereby repealed. The instructions of this circular shall be effective immediately. Yours faithfully, (Abu Farah Md. Nasir) General Manager Phone: 9530252