Merchant banks will face penalties-including licence cancellation-for having failed to bring at least one IPO proposal every two years, as required by the relevant rules.
They were notified of the regulatory position at a meeting held on Wednesday at the Bangladesh Securities and Exchange Commission (BSEC).
"What's the meaning of grabbing a merchant bank licence if a company does not work to bring listing proposals," said BSEC spokesperson Md. Abul Kalam while speaking to The Financial Express after the meeting.
The regulator issued the warning after conducting groundwork on the IPO-related performance of merchant banks.
There has been no new listing since the entry of Techno Drugs into the secondary market in March 2024. Hence, all issue managers have theoretically failed to comply with the rules required to retain their licences.
However, the macroeconomic situation has also been unfavourable for new listings.
When companies operate in a challenging business climate, they are more likely to struggle to secure growth. Potential issuer companies may not be interested in submitting IPO proposals if they have experienced stagnation or decline.
A representative of a merchant bank, wishing not to be named, said it remains to be seen whether the regulator will consider concerns over the macroeconomic situation while deciding the fate of merchant banks.
Mr Kalam said no regulatory action would be taken without justification.
The rules make it mandatory for merchant banks to bring at least one IPO proposal every two years to retain their licences, but they do not imply that the proposals must be approved, he explained.
"An IPO proposal may not eventually be approved by the regulator. Even a rejected IPO proposal adds value to the portfolio of a merchant bank," Mr Kalam said, adding that the BSEC would assess whether merchant banks had made efforts to submit IPO proposals.
Moreover, organisations would be allowed to submit clarifications, if deemed non-compliant by the regulator, to justify why they have failed.
There had also been a long delay before the IPO rules were amended at the end of last year.
Sources at the BSEC said the commission aims to ensure accountability among non-performing merchant banks.
Asked about the issue, Sumit Podder, secretary general of the Bangladesh Merchant Bankers Association (BMBA), said new IPOs are urgently needed for both institutions and investors.
Many issuer companies are likely to submit IPO proposals based on audited financial statements for FY26 under the revised public issue rules. "We hope merchant banks will be able to submit some proposals after June," Mr Podder said.
Preferring anonymity, a meeting participant said the management of IPO applications is not the sole responsibility of merchant banks. Their roles also include supervising capital restructuring through mergers and acquisitions, as well as bond issuance.
"Unfortunately, the central bank is doing the job of merger and acquisition and the issuance of sukuks. Merchant banks' job portfolio must involve areas other than listing," he added.
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