Extend banks' stock exposure deadline

The Dhaka Stock Exchange yesterday urged the central bank to extend the deadline for bringing down banks' investment exposure in the stockmarket by another four years to 2020.

The banks, which are considered major institutional investors, have until July 17 this year to lower their exposure to 25 percent of their total equity, which is a bank's paid-up capital plus reserve, according to existing rules.

The capital market is being affected by the provision as there is a great pressure on commercial banks to reduce their exposure, DSE officials and stakeholders said.

If approved, the extension will ensure banks' active participation in the ailing secondary market, they added.

The DSE also recommended calculating the banks' total exposure to the stockmarket without taking into account their investment in non-tradable and non-listed securities such as investment in preference share or bond and subsidiaries.

The bourse put forward the proposals in a letter to the central bank “with a view to reviving the capital market from its continuous bearish trend”.

“Extending the time limit will give a positive impression to the investors,” the DSE said in the letter.

Rakibur Rahman, a shareholder director of the DSE, along with Md Sayadur Rahman, president of Bangladesh Merchant Bankers Association, submitted the letter to Bangladesh Bank Governor Fazle Kabir.

“Capital market exposure needs to be calculated on the basis of only listed securities in stock exchanges,” according to the letter.

“The monitoring of capital market exposure could be on a quarterly basis. Frequent monitoring and query create confusion and panic situations in the market,” the DSE said. Capital market stakeholders, including merchant banks and stockbrokers, have long been requesting the government to extend the deadline.

The finance minister and the commerce minister on several occasions also hinted that banks will get more time to bring down their capital market investment exposure to the permissible limit.