BB monitoring of investment by banks in share market intensified
Siddique Islam | Tuesday, 18 February 2014
The central bank has intensified its monitoring and supervision of investment in share market by the commercial banks aiming at avoiding any unwanted situation in future, officials said.
"We've taken the issue as a top priority matter to minimise risks of the banks," a senior official of the Bangladesh Bank (BB) told the FE Monday.
He also said the BB has already asked the banks to submit their 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 daily basis.
Besides, the banks have to submit 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.
The BB official also said 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 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.
Talking to the FE, a senior official of a leading private commercial bank said the banks are providing such report to the BB in line with their requirements.
"We are not still sure whether such type of information, where credit entries are not considered without taking total reporting (debt and credit entries) will reflect a bank's total position in the capital market," the private banker said without elaborating.
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.