The stock market regulator has rejected bond issuance proposals worth Tk 2,100 crore from several banks that had earlier received no-objection certificates from the Bangladesh Bank (BB).
According to official documents from earlier this month, Southeast Bank, Al-Arafah Islami Bank, Meghna Bank, and One Bank are among the lenders whose bond proposals were rejected.
BB, the regulator of the banking sector, had earlier issued no-objection certificates after assessing the banks’ capital adequacy and leverage position, liquidity profile, asset quality, stress-test outcomes, repayment capacity, and governance standards.
However, the Bangladesh Securities and Exchange Commission (BSEC) said it rejected the proposals because the banks’ “financial performance, particularly liquidity and profitability, is not satisfactory”.
A no-objection certificate from the BB is a mandatory requirement for banks seeking to issue bonds, but it does not guarantee approval by the stock market regulator.
“After the merger of five banks, there is growing fear that bond subscribers could lose their invest-ments if a bank’s financial condition deteriorates,”
Saiful Islam, President of the DSE Brokers Association of Bangladesh
According to a senior merchant banker, the central bank’s NOC signals that a bond proposal complies with prudential regulations and does not pose systemic risk to the banking system.
“It means the proposal has passed the most critical checkpoint for banking stability,” he said, adding that BB focuses mainly on whether a bond could weaken a bank or create broader financial stress.
The BSEC, by contrast, assesses the proposal from the perspective of the capital market, with emphasis on investor protection, disclosure quality, cash flow, and the issuer’s ability to repay bondholders on time, said the banker, preferring anonymity.
He said subordinated bonds are an important tool for banks to strengthen tier-2 capital without diluting equity, improve maturity matching, and reduce reliance on short-term deposits.
“At a time when many banks are undergoing leadership changes, balance sheet clean-ups, and operational restructuring, bond financing can provide breathing space for a sustainable turnaround,” he said.
Capital market representatives, however, defended the BSEC’s cautious approach.
Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), said the recent merger of five banks had heightened risks for bondholders, as merger schemes addressed depositor interests but offered no clear protection for bond investors.
“After the merger of five banks, there is growing fear that bond subscribers could lose their investments if a bank’s financial condition deteriorates,” he said.
Islam also criticised credit rating agencies, saying they had failed to reflect the true financial health of banks, leaving bond investors exposed.
“Usually, investors rely on credit ratings when subscribing to bonds. But the rating agencies did not properly capture the risks,” he said, adding that bond approvals should therefore be handled with greater scrutiny in the public interest.
He said that banks whose bond proposals were rejected might face short-term pressure, but they should consider raising capital through equity injection instead.
BSEC Spokesperson Abul Kalam said obtaining a no-objection certificate from the BB is only one of several conditions for bond approval.
“It does not mean that if the central bank gives an NOC, the BSEC must approve the bond,” he told The Daily Star.
He said the commission approves debt securities in line with its own rules and regulations, and may reject proposals if a bank’s financial performance and cash flow are weak.
“If cash flow is not satisfactory, the bank may face difficulties in repaying bondholders. That risk has to be assessed independently,” he added.
Bangladesh Bank Spokesperson Arif Hossain Khan said each regulator has a different perspective and operates within its own mandate. “The decision not to approve some bonds is entirely the BSEC’s consideration, and it has the authority to do so,” he said.
Contacted, Khwaja Shahriar, chairman of Al-Arafah Islami Bank, whose bond issuance proposal was rejected by the stock market regulator, said the bank had been on a steady recovery path since the board was reconstituted.
He said liquidity conditions have improved, and the bank’s overall financial position is strengthening gradually.
“We seek the continued support of the BSEC and firmly believe they will assist us in further strengthening the institution’s strength for the sake of national development,” he added.
