The banks would be allowed to invest more in the stock market to help overcome the protracted liquidity crisis
Bangladesh Bank governor on Thursday assured Bangladesh Securities and Exchange Commission (BSEC) that the non-listed companies would be excluded from the banks’ exposure criteria.
Following the assurance from the central bank, the banks would be allowed to invest more in the stock market to help overcome the protracted liquidity crisis, analysts said. Currently, banks are allowed to invest as high as 25% of its paid-up capital market in share buying, both listed and non-listed.
Bangladesh Bank governor Fazle Kabir gave the assurance at a meeting held at Bangladesh Bank headquarters in Dhaka. BSEC Chairman M Khairul Hossain, Financial Institutions Division Senior Secretary Md Ashadul Islam and Investment Corporation of Bangladesh (ICB) Managing Director Kazi Sanaul Hoq were present, among others.
BSEC executive director Md Saifur Rahman told the Dahak Tribune, ‘The central bank governor assured that he would take measures to address the banks’ capital market exposure issue, if he finds it feasible.’
The meeting also discussed banks and financial institutions’ capital market exposures. The exposure is now calculated on the basis of market prices of stocks, which the regulators has been pressing the central bank to calculate on the basis of costing price.
Besides, BSEC sought 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 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.
At the meeting, the central bank, following demand from Investment Corporation of Bangladesh, has decided to issue Tk 852 crore to ICB to support the capital market soon.
It is going to be the second refinancing scheme for the retail investors who had lost huge sums of money during 2010 and 2011 market crashes. In 2013, the Bangladesh Bank gave a refinance scheme of Tk900 crore to the ICB. The new refinance scheme’s tenure has been fixed as of December 2022.
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.
None of the BB top bosses except BB governor was present in the meeting, said the BB officials, adding that they would take steps based on instruction from the BB governor.
The DSE’s benchmark index, the DSEX, lost more 700 points in the last three months while the market value of stocks dropped by about Tk32,000 crore.