Bangladesh Bank governor Fazle Kabir on Thursday assured Bangladesh Securities and Exchange Commission chairman M Khairul Hossain that the central bank would take measures to address banks’ capital market exposure issue.
Kabir gave the assurance at a meeting held at BB headquarters in Dhaka where financial institutions division senior secretary Md Ashadul Islam and Investment Corporation of Bangladesh managing director Kazi Sanaul Hoq were present, among others.
Changing definition of banks’ capital market exposure is also under the central bank’s consideration, BB sources said.
To do so, the central bank may exclude non-listed securities from the banks’ investment calculation in the capital market.
Once non-listed securities are excluded from the banks’ capital market investment calculation, the entities’ capital market investments would reduce accordingly, creating fresh investment scope for the banks, they said.
Capital market exposure of banks is limited to 25 per cent of their capital under the provision 25 (B) of the Bank Companies Act 1991.
The capital includes paid-up capital, share premium, statutory reserve and retained earnings.
Asked, BSEC executive director Md Saifur Rahman told New Age, ‘The central bank governor assured that he would take measures to address the banks’ capital market exposure issue, if he finds it possible.’
At present, banks and financial institutions’ capital market exposures are calculated on the basis of market price.
Following demand from investors, BSEC has been demanding capital market exposure calculation of the institutions on cost price basis.
Besides, it seeks exclusion of banks’ investments in bond, debenture, preferential share and non-listed mutual funds along with funds which are not traded in the stock market from their capital market exposure.
Thursday’s informal meeting discussed the ongoing liquidity situation at the country’s capital market as it has been going through a sharp decline since late January this year.
The central bank, following demand from Investment Corporation of Bangladesh, has decided to issue Tk 852 crore to ICB to support the capital market.
Asked about Thursday’s meeting, BB officials said that the meeting was informal and exclusively among BB governor, BSEC chairman, finance ministry senior secretary and ICB managing director.
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