Bangladesh Bank on Thursday increased banks’ investment limit in the capital market by excluding banks’ investments in unlisted securities from their capital market exposure count.
The central bank issued a circular in this regard on the day.
The circular said that banks’ investments in unlisted securities (equity share, non-convertible cumulative preference share, non-convertible bond, debenture, open-end mutual fund) would be excluded from their total investment (solo and consolidated) in the capital market. The decision will be effective immediately.
The Banking Companies Act 1991, which was amended in 2013, limited a bank’s stock market exposure to up to 25 per cent of its capital. The capital includes paid-up capital, share premium, statutory reserve and retained earnings.
BB has made the decision as stakes held by banks and its subsidiary companies in the non-listed companies are not traded on the stock exchanges.
DSE director Rakibur Rahman said that the decision would help ease the ongoing liquidity crunch in the capital market as it would release a substantial amount of funds.
It will subsequently improve the confidence of investors, he said.
The central bank on Thursday also issued a circular regarding financing through bonds instead of bank loans under special purpose vehicle, alternative investment fund or same type of funds.
The circular mentioned different phases of financing at different project through SPV approved by Bangladesh Securities and Exchange Commission.
Investment by a bank in government infrastructure project must not be more than Tk 700 crore, or single borrower exposure limit, whichever is lower, or 25 per cent of total capital/paid up capital of the bank in special cases.
Bank’s investment in public private partnership project must be below Tk 600 crore, or single borrower exposure limit, whichever is lower, or 22 per cent of paid up capital of the bank in special cases.
Investment by a bank in power and electricity infrastructure, tourism infrastructure and digital infrastructure must not be more than Tk 600 crore, or single borrower exposure limit, whichever is lower, or 20 per cent of total capital/paid up capital of the bank in special cases.
The circular also said that the banks must give importance to risk management regarding investment through SPV.
Banks must consider business capability and amount of investable funds of the SPV concerned as prime parameter. The trustee concerned must take SPV-trustee licence from
Banks cannot buy more than 10 per cent of any unlisted company’s instrument through project-specific SPV.
Regarding investment in coverable bond through project-specific SPV, banks must ensure that after conversion shareholding must not cross 10 per cent of the company’s paid up
BSEC will approve investable convertible and non-convertible bond or debenture through project-specific SPV.
Banks must keep provision at the rate of 25 per cent if they fail to pay the imposed interest of bond or debenture at the end of financial year.
If they continue failing to pay the interest for the second year and third year, they have to keep additional provision of 25 per cent for the second year and 100 per cent for the third
Banks must submit CIB reports considering the investment through project-specific SPV as
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