Subsidiaries of banks have been brought under the capital market exposure limit through a circular Bangladesh Bank issued yesterday.
The restriction was imposed in a manner their investment will now be calculated with their parent banking companies.
Earlier, the banking companies individually could invest 25% of their equity capital. But, the investment by their subsidiaries will, with immediate effect, now be calculated as the total investment in the capital market.
Bangladesh Bank in a circular issued yesterday clarified that the total investment limit will be up to 50% of a sum of consolidated paid up capital, balance in share premium account, statutory reserve and retained earnings.
The amounts should be based on the latest audited financial statements as the central bank clarified issues related to individual and aggregate limits of investment in shares by banks.
There was no investment restriction until yesterday on the subsidiaries of the banks that had allegedly contributed to destabilise the capital market, said a senior Bangladesh Bank official.
The components now be considered in computing the investment would exclude the inter-company transactions, but include subscription by subsidiaries of the bank to any fund intended to invest in capital market; market value of all types of shares, debentures, corporate bonds, mutual funds; margin loan (outstanding) provided to the customers by the subsidiaries of the bank; and bridge loans provided to companies by subsidiaries of the bank against expected equity flows.
The central bank said the banks having investment above the limit shall have to bring it down gradually within July 21, 2016.
It also directed the banks to submit their stock investment statements to the central bank within 10 days from the last working day of every month.
