BSEC pushes 28 banks on special funds for the capital market

| Update:
Mar 24, 2022 11:35:33 a.m.

The securities regulator has asked 28 banks to set up a special fund of Tk 2.0 billion each and invest it in the stock market.

The funds’ investments will not be considered as the banks’ capital market exposure, according to a letter signed by BSEC executive director Mohammad Rezaul Karim and sent to the banks on Wednesday.

The Banking Companies Act 1991 (as amended) allows a bank to have stock market exposure of up to 25% of its capital – paid-in capital, share premium, statutory reserve and retained earnings.

Currently, many banks’ exposure to the market remains well below the limit, the BSEC (Bangladesh Securities and Exchange Commission) said.

” We ask you [banks] take the necessary initiatives for your bank to make new investments in your existing scope to support the capital market and be a motivation for others,” reads the letter.

He pointed out that the country’s stock market is heavily dominated by retail investors who are not professionals; they buy stocks in a whimsical way and involve them in panic selling to often make the market volatile.

In contrast, he added, banks are professional investors and help maintain market stability.

It is a great pleasure for the regulator to facilitate the raising of primary capital by listing banks and issuing rights shares, and to strengthen the bank’s additional Tier I and Tier II capital base by approving applications. bond issue, the regulator said in its letter.

The 28 banks have not yet set up the fund worth Tk. 2.0 billion each.

There are 33 banks that have already formed such funds by giving Tk. 2.0 billion each, under a central bank directive, just for the capital market.

Bangladesh Bank in February 2020 allowed banks to set up funds for a period of five years to invest in the capital market.

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