Bangladesh Bank Headquarters

Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has fined seven commercial banks for their recent share-market activities by violating the existing rules and regulations, officials said.

“We’ve imposed the fines with substantial amount of money on the banks for violating the rules of the existing Banking Companies Act and the central bank’s instructions on share-market investment,” a senior official of the Bangladesh Bank (BB) told BBN while confirming the news.

But the official wouldn’t name the names of the errant banks and the amount of money which will be deducted from their accounts as penalty.

The central bank found that one bank or two banks had exceeded their share-market-exposure limits on consolidated basis and the rest of the banks had provided fake information on their investment in stocks to the BB on weekly and monthly basis.

Besides, the banks invested their funds further in the share market while having total investments above the prescribed limits, according to sources.

Besides, the central bank brought eight more banks under its close monitoring after it had detected anomalies in their recent share- market activities.

Talking to BBN, another BB official said the central bank will take action against the banks after completing its investigations.

Around half a dozen other banks are set to be included in the BB’s close-monitoring list, the central banker hinted.
Both public and private commercial banks are included in the central bank’s watch list, according to the insiders.

Earlier on September 11 last, the central bank intensified its monitoring and supervision on banks’ investment in the capital market through revising reporting format for avoiding recurrence of an unwanted situation in future.

Under the revised provisions, the banks are now allowed to submit their reports on fresh investment in the capital market to the BB on a weekly basis, mentioning daily transactions separately.

Earlier, the banks were eligible for submitting such weekly reports to the central bank on gross-transaction basis without mentioning daily transactions individually.

The BB’s latest move comes against the backdrop of a sharp rise in the prime index of the Dhaka Stock Exchange (DSE) in recent months.

Between July 1 and September 30 of the current fiscal year, DSEX, the benchmark index of the Dhaka Stock Exchange, rose 473 points or 7.72 per cent to reach 6093 points on September 30, 2017.

The market rose sharply on the back of large-cap shares, especially heavyweight banking sector, which led to the rise in daily turnover and the list of gainers in recent weeks, according to the market operators.

They also said the increase in excess liquidity in the banking sector opened up fresh opportunity for banks to invest more in stocks through lending to merchant banks.

Total loan portfolio to the stock-market stood at BDT 76 billion at the end of 2016, according to BB data. Of the amount, 53 per cent came from banks and the rest from non-bank financial institutions (NBFIs). The banks invested BDT 21.30 billion through merchant banks and BDT 19 billion through other instruments last year.