The Bangladesh Bank (BB) has asked the commercial banks to bring down their overall capital market investment within 25 per cent of total capital by July 21, 2016 to minimise risk in investment portfolios, officials said Monday.
The central bank issued a circular in this connection Monday and asked the commercial banks for taking effective measures to adjust their share market investment within the prescribed limit by the stipulated timeframe.
"We've issued the directives in line with the Bank Company (Amended) Act 2013, considering the recent situation in the country's capital market," a BB senior official told the FE.
He also said the banks are allowed to adjust their capital market exposures gradually without hindering the activities of the market.
"They (the banks) do not have to hurry to adjust their portfolios in a short time. Rather they can take the opportunity to do it throughout the three-year timeframe," the central banker explained.
He also said besides allowing a long timeframe for adjusting investment portfolios, the banks are also given some others facilities, compared to the previous regulations issued in this regard.
According to the Bank Company (Amended) Act, total capital comprises of four components - paid up capital, balance in share premium account, statutory reserve and retained earnings, as stated in the latest audited financial statements.
While calculating the banks' total investment in capital market all types of shares, debentures, corporate bonds, mutual fund units and other securities, owned by them, will be considered.
Under the new regulations, a bank can provide guarantee against loan, taken by its subsidiary company from other banks and financial institutions without any increase in its capital market exposure.
Earlier, the guarantee provided by the banks was calculated under its own capital market exposure, according to the BB officials.
The banks have to comply with the latest circular regarding capital market exposure limit, and submit report on their share-holding position on monthly basis in a prescribed form to the BB's Department of Off-site Supervision within 10th of each month.
Helal Ahmed Chowdhury, managing director and chief executive officer of Pubali Bank Limited, told the FE: "Initially there may be problem for some banks. But since the three-year timeframe has been given for adjustment, it may not be difficult for the banks to bring down their capital market exposure according to the regulatory framework. But the banks will continue to act for boosting the country's capital market."
Financial Express
