Bank of Bahrain and Kuwait (BBK) is preparing for a BD50 million ($132.6 million) increase of its tier-one capital through a rights issue.

The capital increase, which is the first for BBK in 15 years, will take its tier-one capital up to BD185 million, and will be used to finance future growth.

'Its main purpose is to support our growth plans, both through expansion and diversification, as well as to support our potential need to conform with Basel II requirements, which kick in on January 1 next year,' said BBK chief executive Farid Al Mulla.

Basel II is a series of international agreements on banking reform that are being gradually introduced to the kingdom's financial sector.

In the run-up to the January 1 deadline, which covers the first pillar of Basel II, the Central Bank of Bahrain plans to replace an industry-wide 12 per cent capital adequacy requirement with individual minimum capital ratios for each local bank.

This new issue will give BBK a capital ratio of 14.5 per cent.

The bank plans to offer shares for 500fils each to existing shareholders.

BBK shares were trading at 710fils on the Bahrain Stock Exchange on Sunday before trading was suspended.

Al Mulla said approval had been received from BBK's major shareholders, although the rights issue still required regulatory approval.

BBK said last month it could borrow up to $1 billion under a 10-year euro medium-term note programme. The bank has already successfully completed the issuance of an inaugural $275m subordinated bond investment.- TradeArabia News Service