BB limits banks’ investments in non-listed cos

Staff Correspondent | Published at 12:00am on May 27, 2019

Bangladesh Bank on Sunday set the banks’ investment limit in non-listed securities at 5 per cent of the banks’ sum of paid up capital, share premium, statutory reserve and retained earnings.
The limit was set in the central bank’s guidelines on banks’ investments in non-listed securities. The guidelines were issued on Sunday.
BB on May 16 this year excluded banks’ investments in the non-listed securities from the entities’ capital market exposure count, prompting BB to issue the fresh guidelines setting limit on their investments in non-listed securities.
The BB guidelines also said that the banks’ investments in any entity must be limited to 10 per cent of the entity’s paid up capital. However, banks would be allowed to purchase 15 per cent of the units of a single mutual fund.
The BB guidelines also said that the buying price of any non-listed securities must not exceed 110 per cent of net asset value of the non-listed security at the time of purchasing.
In case of purchasing preference shares, banks are allowed to limit its exposure to the single borrower exposure limit and such investment must be made for the maximum five years.
Besides, banks will have to keep 25 per cent provision of its principal investment amount along with interest if interest or dividend is not recovered duly at the end of an accounting year. If such thing happens in the second year, banks will have to keep aside another 25 per cent as provision and banks will have to keep 100 per cent provision in case of repetition of such incident in the third consecutive year.
The central bank also asked the scheduled banks to consider such investments as loans and report to the Credit Information Bureau on the investments as per rules.
Banks have also been asked to report to the central bank’s off-sight supervision department on the investments within 10 days after the end of every quarter.
Banks’ equity shares of any entity, non-convertible cumulative preference shares, non-convertible bond, debenture and open-end mutual fund would be considered as banks’ investments in non-listed securities.