The Bangladesh Merchant Bankers Association has requested the Bangladesh Securities and Exchange Commission to ease some of the provisions of the drafted rules of risk-based adequacy rules by cutting the total capital requirements for merchant banks.
The BSEC on February 15 drafted the risk-based capital adequacy rules, 2018 to reduce the investors’ risk.
The association on March 7 requested the commission to set the minimum liquid balance for merchant banks at Tk 1 crore instead of Tk 5 crore while regulatory capital at Tk 25 crore instead of Tk 35 crore for putting positive impact on the capital market in the long-run.
The regulatory capital for the full-fledged stockbrokers has been set at Tk 15 crore and the minimum liquid balance at Tk 4 crore in the draft rules.
The BMBA urged to set the capital reserve at 2 per cent instead of 10 per cent that would facilitate the company to distribute profit to the shareholders of the merchant banks.
Regarding the implementation of the law within two years of approval, the BMBA suggested more time saying that it was a new concept for the country’s capital market and that it also required various logistic facilities like software development and skilled manpower.
The merchant banks requested half-yearly reporting system instead of monthly/quarterly reporting.
In case of any shortfall in the CAR, the market intermediaries requested flexible provision regarding reasonable time to maintain required CAR as there may be unexpected shortfall in the CAR for any adverse market movement.
The draft rules set minimum CAR at 1.25 times and the BMBA requested to cut it at 1.05 times considering the capital market situation.
Regarding the large exposure to a single-party instrument, the BMBA requested to consider it at 10 per cent instead of 5 per cent as the margin facility has already been provided and it would take reasonable time to adjust the exposure.
The BMBA suggested excluding borrowings from associate companies in determining total liabilities for calculating regulatory liquid capital balance for merchant banks.
The merchant bankers also sought arrangement of training programmes by the regulator on the new rules before those become effective.
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