Sampath Bank debenture sale plans have been unveiled as the private lender moves to raise up to 20 billion rupees through a listed, Basel III-compliant issuance aimed at strengthening its regulatory capital base and supporting future growth.
Sampath Bank debenture sale to strengthen capital with Basel III Tier 2 issue
Sri Lanka’s Sampath Bank has announced plans to raise up to 20 billion rupees through a major debenture issuance, marking a strategic step to reinforce its capital position amid evolving regulatory and market conditions.
In a disclosure to the Colombo Stock Exchange, the bank said it intends to issue as many as 200 million debentures at a face value of 100 rupees each. The proposed fundraising will be carried out through Basel III-compliant Tier 2 instruments that will be listed, rated, unsecured, subordinated, and redeemable, reflecting the bank’s focus on aligning capital management with international banking standards.
The proposed Sampath Bank debenture sale will also provide flexibility in structure, as the instruments may be issued as conventional debentures and/or Green Bonds and/or Sustainability Bonds. The securities will include a non-viability conversion feature, a regulatory requirement designed to absorb losses and protect depositors in extreme stress scenarios.
According to the bank, the issuance will not necessarily take place in a single tranche. Instead, debentures may be offered through one or more issuances within a two-year period from the date shareholder approval is obtained at an Extraordinary General Meeting. This phased approach allows the bank to respond to market conditions, investor appetite, and funding needs over time.
Sampath Bank said that key details of each issuance, including the structure, type of debentures or bonds, coupon rates, interest payment frequency, and other applicable terms, will be disclosed prior to the opening of each offer. Market participants typically view such disclosures as critical in assessing the risk-return profile of subordinated debt instruments, particularly in a volatile interest rate environment.
The bank plans to begin the programme with an initial issuance of up to 100 million debentures. These will carry maturities of five and seven years, offering investors medium- to long-term exposure to the banking sector while contributing to the lender’s Tier 2 capital buffers. Tier 2 instruments play a vital role in meeting regulatory capital adequacy ratios, particularly as loan growth and balance sheet expansion increase risk-weighted assets.
The move comes at a time when Sri Lankan banks are navigating a complex operating environment shaped by tighter regulation, cautious credit growth, and heightened scrutiny from both regulators and investors. Strengthening capital through subordinated debt issuance allows banks to support lending activity without immediate equity dilution, preserving shareholder value while maintaining compliance with prudential requirements.
The inclusion of Green and Sustainability Bonds as part of the potential issuance reflects growing interest among Sri Lankan financial institutions in aligning funding strategies with environmental, social, and governance objectives. Such instruments are increasingly used to finance projects with measurable environmental or social benefits, while also broadening the investor base to include institutions with sustainability mandates.
Analysts note that the success of the Sampath Bank debenture sale will depend on several factors, including prevailing interest rates, investor confidence in the banking sector, and perceptions of credit risk. As subordinated and unsecured instruments, Tier 2 debentures typically offer higher yields than senior debt to compensate investors for their lower ranking in the event of liquidation.
Regulatory approval remains a key prerequisite for the issuance. Sampath Bank confirmed that the debenture programme is subject to the necessary approvals from relevant authorities, a standard requirement for capital instruments that qualify under Basel III norms. Shareholder consent at an Extraordinary General Meeting is also required before the programme can proceed.
From a broader perspective, the planned fundraising highlights the continued reliance of Sri Lankan banks on domestic capital markets to meet long-term funding and capital needs. With external funding avenues constrained and equity markets remaining selective, debenture issuances have emerged as an important tool for balance sheet optimisation.
For investors, the proposed instruments offer an opportunity to gain exposure to one of Sri Lanka’s leading private banks through listed debt securities, with the added transparency of credit ratings and stock exchange listing requirements. However, as with all subordinated instruments, careful assessment of terms, credit fundamentals, and regulatory features such as non-viability conversion will be essential.
As Sampath Bank moves closer to securing approvals and finalising terms, market attention is likely to focus on pricing, demand levels, and the potential role of sustainability-linked instruments within the overall programme. The outcome will provide insights into investor sentiment toward bank capital instruments in Sri Lanka’s evolving financial landscape.