Bangladesh Bank has been requested to impose a limit on the commercial banks’ capital market exposure limit to get released the second tranche of a foreign loan of US$150m for the country’s capital market development.
A guideline should be formulated and issued through a circular by today, according to a decision taken at a meeting of the finance ministry on Sunday, said an official on Wednesday.
It is one of the seven conditions remained to be complied to get released the installment of Asian Development Bank’s US$300m fund. Authorities have already complied eight conditions so far out of the total 15. Chaired by Banking and Financial Institutions Division Secretary M Aslam Alam, the meeting decided that the central bank would implement the condition on the exposure limit to reduce the banks’ total direct and indirect exposure to equity risk as a percentage of capital.
The authorities have also been asked to implement other conditions within the stipulated time frame set at the meeting.
As per the decision, Bangladesh Securities and Exchange Commission (BSEC) has to make reports generated from its market surveillance system to be part of the improved monitoring of the capital market by the end of September.
Other ADB conditions are: the finance division has to form an independent financial reporting council to adopt international accounting and auditing standards for public interest entities, undertake a review on the capital requirements for intermediaries through a risk-based supervision approach by BSEC, appoint chief accounting officer in the BSEC, and the regulator has to establish a special tribunal to adjudicate capital market related disputes, and to issue regulation to provide powers, functions and jurisdiction of the tribunal.
Last year, ADB had signed a deal with the government to provide US$300m loans to help Bangladesh improve its capital market, making it a safer and more attractive place for investment.
