Banks can invest Tk 45b more in stock market

All scheduled banks can now invest Tk 45 billion more in the capital market after availing the Bangladesh Bank's (BB) policy support for adjustment of their stock market overexposure by July 21.
"The investment opportunity has been created following the central bank's policy supports, provided to the banks for complying with the legal requirement on their stock market exposure within the stipulate timeframe without selling any shares in the market," BB deputy governor S K Sur Chowdhury told a group of reporters on Thursday.
A total of 13 commercial banks, out of 56, availed the policy support to bring down their capital market investment within 25 per cent of their total capital by July 21 in line with the Banking Companies (Amended) Act 2013.
After availing the policy support, the capital market exposures of One Bank stood at 23.99 per cent, followed by Janata Bank 23.81 per cent, Mutual Trust Bank and Mercantile Bank 23.69 per cent, Shahjalal Islami Bank 23.55 per cent, Premier Bank 22.39 per cent, AB Bank 21.99 per cent, National Bank 21.03 per cent, Bangladesh Development Bank 21.71 per cent, Pubali Bank 20.15 per cent, IFIC Bank 19.30 per cent, the City Bank 14.66 per cent, and Southeast Bank 11.90 per cent.
Now these 13 banks can invest Tk 15 billion more in the share market after adjustment of their overexposure by availing the BB policy support, according to the deputy governor.
On April 27, the central bank extended the support to the banks for adjustment of their stock market overexposure within the stipulated timeframe without selling any shares in the market.
Under the policy support, a total of Tk 19.84 billion loan was converted into capital of the banks' subsidiaries for complying with the share market exposure regulation within the deadline.
The banks were allowed to adjust their overexposure through restructuring the exposure components and enhancing the capital of their subsidiaries with some internal adjustments in line with the BB's latest policy support.
"It will help develop the country's capital market in the long run," Mr. Sur Chowdhury explained.
Total capital of the 13 banks' subsidiaries will be over Tk 35.40 billion following the policy support, according to the central bank statistics.
Of the amount, Tk 19.84 billion has been provided as loan, Tk 12.95 billion against shares, Tk 419.2 million from mutual funds, and Tk 2.20 billion has been converted into capital from their investment in placement shares.
"The authorities concerned should take effective measures to bring dynamism in the country's capital market by restoring confidence of the investors," the BB deputy governor noted.
The central bank earlier instructed the banks to bring down their overall capital market investment within 25 per cent of their respective total capital by July 21, 2016 in line with the Banking Companies (Amended) Act 2013.
According to the Banking Companies Act 1991 (Amended in 2013), 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.
While calculating total investment in the capital market different components, including all types of shares, debentures, corporate bonds, mutual fund units, and other securities, will be considered, it added.
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