BB issues policy to enlist bank-linked cos on stock market

HM Murtuza | Published at 11:44pm on July 30, 2020

The Bangladesh Bank on Thursday made it mandatory for the power and energy, tourism and digital infrastructure sectors’ companies having any scheduled bank’s equities to be enlisted on the country’s stock exchanges.

The BB issued a circular in this regard on the day with a view to creating liquidity on the market, enhancing quality of investments and lessening risk of investments.

The initiative to bring such companies to the capital market comes at a time when the central bank has taken an expansionary monetary policy along with lowering the policy rates to inject money into the economy.

An official of the central bank said that the capital market might witness increased liquidity supply in the coming days and the increased supply might also result in bullish trend on the market.

When the market would be bullish, there would requirement of good quality scrips to cool down the market and to protect the capital market from any unusual surge in share prices, the BB official said.

In many entities where banks have investments, representatives of banks are already holding directorship posts and the policy would make the banks to bring those companies to the capital market, he said.

Besides, the enlistment of those companies would also make banks’ investments in those companies liquidable along with improving corporate governance of those companies.

However, the mandatory enlistment would not be applicable to the special purpose vehicle, alternative investment fund, similar funds, and projects taken under the public private partnership.

Because of the new policy of the central bank, many subsidiaries of the banks will have to enlist them on the country’s capital market soon.

In case of equity exposure or investments in such companies or projects related to power and energy, tourism and digital infrastructure sectors, there must be an unchangeable agreement among the investing banks along with other investors that the entity must be enlisted on the stock exchanges within one year of the first subscription.

For the companies in which any bank has already taken exposure, managing director of the scheduled bank concerned were asked to take initiative within six months to bring those companies to the country’s capital market.

The listing of such companies must be completed under the direct listing process and the issue price of share must not be less than the average share acquisition price of a scheduled bank.

In the first year of listing, the amount of share offloaded must not be higher than 5 per cent.

The central bank also allowed banks to transform convertible bond issued by such companies in

which the bank has equity exposure, into ordinary shares.

In case of enlistment on the stock exchanges, the banks’ exposure in such companies would not be treated as the banks’ exposure in the capital market.

The central bank’s off-sight supervision department issued the circular under the section 45 of the Bank Company Act, 1991.