BB may ease rules for banks' stock exposure reports

The central bank hinted that it could reduce the frequency of banks' stockmarket exposure reports from weekly to fortnightly.

Bangladesh Bank will consider it if the stockmarket regulator sends a proposal, said a senior official of the central bank, quoting a decision of the coordination meeting of regulators held at the central bank's headquarters on October 29.

Bangladesh Securities and Exchange Commission is yet to send any such proposal to the BB.

"We are waiting on the minutes of the last meeting. Once we get them, we will move forward," said Saifur Rahman, spokesman for BSEC.

In January, the central bank had cut short the frequency at which the banks furnished their stockmarket investment reports -- from daily to weekly.

Prior to that, banks sent the reports to BB on a monthly basis.

The central bank monitors banks' investments in the stockmarket with the reports.

If any bank's exposure becomes high, the central bank steps in and asks the bank to bring down its investment. Banks are always concerned about their stockmarket exposure due to the BB's strict monitoring in this aspect, according to officials.

"We cannot buy shares of a company even when the price becomes very lucrative," said an official of a private bank.

For instance, the price of Titas Gas shares has come down to less than Tk 50 in recent days, but the bank could not buy it because its exposure will be too high, he added.

As per rules, banks have to bring down their stockmarket exposure to 25 percent of their paid-up capital by June next year.

Earlier, it was 10 percent of a bank's liabilities or deposits.

For example, AB Bank's paid-up capital stands at nearly Tk 600 crore, so the bank will not be able to invest more than Tk 150 crore, including its exposure to its capital market subsidiaries, in the stockmarket.

Under the previous system, if AB's deposits were Tk 10,000 crore, it could have invested Tk 1,000 crore in the stockmarket.

Capital market stakeholders, including brokers and merchant banks, fear if the banks have to bring down their investment to the limit set by BB, they will have to sell a sizeable amount of shares, which could be enough to create a crash like in 2011.