The taskforce for capital market reforms has suggested excluding power plants from the list of marginable securities as their nature of having fixed tenures makes them more aligned with bonds.

The taskforce submitted its final proposals to the Bangladesh Securities and Exchange Commission on Sunday before disclosing them to the media through a press briefing at the regulator's office in Dhaka today.

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Stricter conditions proposed for margin loans

It previously submitted a draft proposal in February, where it proposed that power plants with limited lifecycles should not qualify for margin financing during the last two years before their expiry.

According to the final proposal, mutual funds as a group should be non-marginable. Also, the marginable limit of banks and financial companies should be linked with their net asset value, not earnings.

This is because the valuation of banks and financial institutes are ideally linked to their net asset value and return on equity.

If a client has two accounts, with one being a margin account while the other is a non-margin account, and the margin account goes negative, the institution should have absolute discretion to sell from the non-margin account to repay the negative amount.

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Capital market taskforce recommends stricter rules for margin loans

Also, clients should be required to pay interest against their margin loans within 15 days of the expiry of the notice period.

If left unpaid, brokerages should have the right to liquidate holdings to recover outstanding interest.

Meanwhile, considering how margin loan products are different from regular loan products, it proposed not including defaulters of margin loans in the Credit Information Bureau (CIB) report.

The assessment of earning, collateral and so on is different for margin loans. Besides, merchant banks and stockbrokers do not have access to the CIB database, the taskforce said.