Central bank finally moves to solve exposure problem
Banks can invest in listed securities up to 25% of their equity on a solo basis and 50% on a consolidated basis, according to the Bank Companies Act
The Bangladesh Bank has finally moved toward a solution to banks' capital market exposure problem.
It wrote to the Ministry of Finance on Monday regarding some changes in the capital market exposure part of the Bank Companies Act, said Md Serajul Islam, executive director and spokesperson of the central bank.
He declined to share the details of the letter.
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However, sources said among many recommendations from the capital market groups, the central bank has responded to two of the demands – keeping all secured bonds off-exposure and calculating banks' capital market exposure based on the cost price of the listed securities, instead of the existing market price method.
Following new Governor Abdur Rouf Talukder's joining and his courtesy meeting with Bangladesh Securities and Exchange Commission (BSEC) Chairman Professor Shibli Rubayat-Ul-Islam recently, the Bangladesh Bank is being believed to give a hand to the capital market.
Banks can invest in listed securities up to 25% of their equity on a solo basis and 50% on a consolidated basis, according to the Bank Companies Act.
And the market price method often forces banks to sell shares to keep their capital market exposure within the limit when the secondary market prices soar.
As banks are major institutional investors in the bourses of Dhaka and Chattogram, their selling pressure hinders the market rallies every now and then.
The BSEC and capital market institutions have been requesting the Bangladesh Bank to calculate exposure based on the actual cost of the held securities to avert the selling pressure.
Also, banks' investments in bonds should be excluded from their market exposure calculation, BSEC has been recommending in recent years.
