The Bangladesh Bank (BB) has sought permission from the ministry of finance (MoF) to give the local banks a waiver on setting up separate subsidiary companies for carrying out securities custodial business, sources said.
Earlier, the BB gave such a waiver to four foreign banks in Bangladesh for five years under the relevant Section of Bank Company Act, they added.
The Sub-section 3 under Section 7 of the amended Bank Company Act 1991 mentions, "Bank companies should not be engaged directly in any business including stock broker, stock dealer, merchant banker, portfolio manager for which registration from Securities and Exchange Commission is needed."
It said if any bank company wanted to be engaged in such types of businesses, it would need to form a separate subsidiary taking prior permission from the central bank.
As securities custodial service, banks provide a range of securities services to their clients including safekeeping and settlement, reporting, corporate actions, dividends collection and distribution, proxy voting, tax reclaim services, fund administration and providing market news and information.
BB governor Dr Atiur Rahman in a recent letter to the Secretary of the banks and financial institutions division of the finance ministry Dr M Aslam Alam said the amendment to the Bank Company Act 1991 was brought to reduce banks' involvement with the stock market.
Besides, the amendment also aimed at separating the stock market activities from commercial banking, he said.
Referring to the amendment, Atiur Rahman said the banks also needed to form separate subsidiaries to provide securities custodial services to their clients.
He wrote that four foreign banks, working in the country, were given waiver for five years on setting up subsidiaries considering complicacies in the formation of separate companies and for the sake of brining stability to the stock markets.
"The central bank finds providing five years' waiver to the local banks on setting up separate subsidiary companies for the interest of stock market logical," the BB governor added.
A senior central bank official said some 30 banks are listed with stock markets which floated shares through initial public offerings (IPOs). Many of them carry out securities-related business through forming separate subsidiary companies, while many of them are yet to do so.
He said once the local banks got the waiver like the foreign banks did, they would not need to form separate companies to carry out the securities custodial business.
BB seeks MoF nod to give banks waiver on forming subsidiary cos
Syful Islam | Published: February 17, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
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