The decision was taken at a meeting between the Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank (BB)
Banks will be allowed to declare a maximum of 35 per cent dividend instead of 30 per cent for shareholders, much to the cheer of the stock market investors.
The decision was taken at a meeting between the Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank (BB) at BSEC Bhaban in the capital on Monday, said a press release.
The central bank will take the necessary steps, said the release.
Last month, with the view to safeguarding the financial health of lenders that are bound to see a spike in loan delinquency in the coming days as a result of the pandemic, the BB imposed the cap on the dividend.
The central bank has decided to not extend the loan moratorium facility beyond December 31 last year, a development that is expected to raise the volume of default loans on the lenders’ books as businesses impaired by the pandemic fail to make instalments on their loans.
To prevent the banks’ from sinking into a capital shortfall, the central bank has now put in roadblocks.
Banks that can maintain a minimum 15 per cent capital adequacy ratio (CAR) -- which is a bank’s capital reserve to cover their risk exposure -- with a 2.5 per cent capital conservation buffer or more without the deferral provisioning facility offered by the BB for the pandemic can declare as high as 30 per cent dividend with a maximum of 15 per cent cash dividend.
Those who are capable of keeping a CAR of 13.5 per cent to 15 per cent with a 2.5 per cent capital conservation buffer will be able to declare a total 25 per cent dividend with a maximum of 12.5 per cent in cash dividend.
Prior approval of the central bank is needed for announcing the dividend, said the BB notice yesterday.
Furthermore, banks that can keep a minimum of 11.875 per cent capital or more with a 2.5 per cent capital conservation buffer without the deferral provisioning facility of the BB could declare a total 15 per cent dividend with a maximum of 7.5 per cent in cash dividend.
Lenders that keep 12.5 per cent capital could declare a total of 12 per cent dividend with a maximum of 6 per cent in cash dividend.
Those who can keep CAR of 11.875 per cent to 12.5 per cent along with the deferral facility of the central bank could declare a total of 10 per cent dividend with a maximum of 5 per cent in cash dividend.
The banks could declare a maximum of 5 per cent stock dividend if they keep a minimum of 10.625 per cent and a maximum of 11.875 per cent capital.
It is not a good sign to move away from the decision previously taken by the central bank, said two managing directors of two private banks seeking anonymity.
A dividend of 30 per cent is enough for shareholders amid the difficult time because the future is very uncertainty as the COVID-19 pandemic has taken a new turn.
Now, the financial health of a good number of banks are not good and the lenders must have to maintain a strong capital base amid the difficult time created by the pandemic.
“If the lenders declare a good dividend, maybe the stock market will be buoyant for today but who will ensure that the market will not be bad tomorrow,” said one of the CEOs.
At the meeting, both the regulators also agreed to request the National Board of Revenue to cancel a notice that taxed dividends from listed companies in the bourses.
During the meeting, it was also decided that listed non-bank financial institutions, which were barred from paying more than 15 per cent cash dividend, will be able to pay bonus dividends, said a release issued by the stock market regulator.
Bangladesh Bank will later clarify what percentage of bonus will be paid as dividend.
It was also decided that necessary steps will be taken to motivate investing from the Tk 200 crore special fund of the scheduled banks in the stock market, such as amending the relevant rules stated in a 2015 central bank circular.
Additionally, it was also agreed to boost investment in fixed income securities such as Sukuk, corporate bonds, green bonds, etc.
The two regulators also agreed to ensure that all investors could make transactions with treasury bills and bonds in the stock market.