Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has asked the commercial banks to limit their total investment in capital market on consolidated basis along with the existing solo one to minimise risk in investment portfolios, officials said.
Under the new provisions, the market value of total investment of a banking company in capital market on consolidated basis will not exceed 50 per cent of the sum of its consolidated paid up capital, balance in share premium account, statutory reserve and retained earnings as stated in the latest audited financial statements.
The banks have also been asked for taking necessary measures to bring down their excess over limit investment in capital market gradually by July 21, 2016 both solo and consolidated basis.
The Bangladesh Bank (BB) issued a circular in this connection Tuesday and asked the banks for taking effective measures to adjust their share market investment within the prescribed limited by the stipulated timeframe.
All investments of the banks except the inter-company transaction, subscription to any fund intended to capital market investment, market value of all capital market leaning securities including shares, margin loan provided to the clients and bridge loans provided to different companies by the subsidiaries will be taken into consideration while calculating total capital market investment on consolidated basis, according to the circular.
The circular also said the banks must have to comply with the capital market exposure limit and submit reports on their monthly-based share-holding position in a revised prescribed form to the Department of Off-site Supervision of BB within 10th of each month.
Earlier on September 16 last year, the BB asked the banks to bring down their overall capital market investment within 25 per cent of total capital by July 21, 2016 in line with the Banking Companies (Amended) Act 2013.
According to the Banking Companies Act 1991 (Amended 2013), total capital comprises of four components – paid up capital, balance in share premium account, statutory reserve and retained earnings, as stated in the latest audited financial statements.
While calculating total investment in capital market different components including all types of shares, debentures, corporate bonds, mutual fund units and other capital market securities will be considered.
BBN/SSR/AD-26Feb14-8:48 am (BST)