BMBA plea to dispel ambiguity on margin loan ratio

Merchant bankers have requested the securities regulator's to clarify whether the regulatory directive earlier issued to reduce margin loan ratio will be applicable only for disbursement of fresh credits or previous ones, officials said.
The Bangladesh Merchant Bankers Association (BMBA) made the plea in a letter sent to the Bangladesh Securities and Exchange Commission (BSEC) Sunday as they are unable to comply with the reduced loan ratio by executing forced sales due to negative equity.
As per the BSEC's directive issued on September 30, 2012, the merchant bankers will have to comply with the margin loan ratio 1:0.5 from July 1 this year.
"We seek your kind clarification on whether the credit ratio 1:0.5 is applicable for the new margin loan clients/new margin loan disbursement only or for all existing clients whose loan ratios are above 1:0.5," the letter signed by the BMBA President Tanjil Chowdhury said.
The securities regulator issued a directive on September 30, 2012 by setting four ceilings to lower the ratio of margin loan to decrease investors' dependency on credits.
In its directive the BSEC asked the merchant banks and brokerage firms to disburse margin loans at a ratio 1:2 up to June 30, 2013.
And the lenders will disburse credits at the ratio 1:1.5 from July 01, 2013 to December 31, 2013.
The loan ratio for the period of January 01, 2014 to June 30 will be 1:1.
And From July 01, 2014 the loan ratio will come down to 1:0.5.
When asked, a senior official of the securities regulator said the regulator will deliver its clarification regarding the loan ratio very soon.
"The BMBA has sought the clarification as it was not mentioned clearly in BSEC's directive whether the stipulated credit ratio will be applicable for fresh disbursements or existing ones. However, we will clarify the directive soon," the BSEC official said.
In its letter, the BMBA has also said the merchant bankers will need to go for forced sales in many accounts to comply with the ratio 1: 0.5.
In this connection, the BSEC official said the regulator so far sympathetically handled the issues of capital market considering the interest of affected investors.
"That's why, I think merchant bankers need not to go for forced sales," the official added.
The chief executive officer of a leading merchant bank said the aggregate amount of margin loans disbursed earlier has stood at Tk 140.0 billion.
"Presently margin loans are being disbursed at the ratio 1:0.5. The loan ratio 1:0.5 could not be implemented in the old portfolios as investors are in miserable position," the merchant banker said.