Dhaka, Bangladesh (BBN)- The International Monetary Fund (IMF) has welcomed the Bangladesh Bank (BB) steps to tighten regulations on related lending and closely monitor banks’ stock market exposures.
“Bangladesh Bank is expected to continue strengthening financial supervision, while avoiding regulatory forbearance. Its steps to tighten regulations on related lending and closely monitor banks’ stock market exposures are welcome,” the IMF said in a statement on Thursday.
It also said strengthening the state-owned commercial banks remains another focus of financial reforms, centered on improving governance, automating financial reporting, and recapitalising these banks.
The central bank of Bangladesh has already intensified its monitoring and supervision of investment in share market by the commercial banks aiming at avoiding any unwanted situation in future.
As part of the moves, the BB is now collecting information on the bank’s total fresh investments in share market, fresh fund provided to their subsidiaries, funds given to others for capital market activities and margin loans provided to the customers by the subsidiaries on weekly basis instead of daily basis earlier.
Besides, the banks are submitting reports on their share-holding position on a monthly basis in a prescribed form to the BB's Department of Off-site Supervision within the 10th of each month.
"We've taken the issue as a top priority matter to minimise risks of the banks," a senior official of the Bangladesh Bank (BB) BBN in Dhaka.
The central bank is collecting such information as part of its intensified monitoring and supervision of investment in the share market by the banks, the BB official explained.
The central bank has taken the latest measure against the backdrop of some banks increasing investment in the share market instead of bringing it down in line with the Banking Companies (Amended) Act 2013.
Earlier on September 16 last year, the BB asked the commercial banks to bring down their overall capital market investment within 25 per cent of total capital by July 21, 2016 to minimise risks in investment portfolios.
The banks are allowed to adjust their capital market exposures gradually without hindering the activities of the market, the central banker added.
According to the Banking Companies (Amended) Act, total capital comprises four components - paid- up capital, balance in share premium account, statutory reserve and retained earnings, as stated in the latest audited financial statements.
BBN/SSR/AD-30May14-4:04 pm (BST)