Dhaka, Bangladesh (BBN)- The commercial banks’ exposure to the capital market has declined in recent months following continuous monitoring by the central bank, officials said on Saturday.
The average investment in stocks of all 47 scheduled banks came down to 3.7 per cent in February, from 5.0 per cent of the previous month, according to the central bank statistics.
Under the existing act, banks are not allowed to invest more than 10 percent of their total liabilities in the capital market.
Currently, at least five private commercial banks (PCBs) have investment in stocks worth more than 10 per cent of their respective liabilities, violating the permissible limit, the Bangladesh Bank (BB) officials said.
“Three PCBs, out of five, are expected to bring down their exposure in April, after launching their own subsidiaries to deal with capital market business,” a BB senior official told the Financial Express (FE), a local newspaper.
He also said three PCBs launched their subsidiaries this month, and it will be shown in their reports in April.
“Other two PCBs will be able to bring down their holding by the end of the next month. The central bank is closely monitoring the performance of all the banks in this connection,” he said.
A total of 11 PCBs, which have exceeded the exposure limit, have been identified since June last.
“It is a good news that the banks have been gradually reducing their investments in the country’s capital market without disturbing the market,” another BB official said.
“The capital market investment of the banks has been calculated using marking to market system to minimize their credit risk,” he added.
Marking to market or mark to market system is a process of calculation to determine the market value of assets.
BBN/SSR/AD-20Marc11-12:33 am (BST)