BB eases rules for banks’ exposure to stockmarket

Bangladesh Bank yesterday relaxed the rules related to banks' investment in stocks in a move to boost the ailing market.

Now, the banks will not have to sell shares to adjust their stockmarket exposure exceeding the permitted ceiling, according to Anwarul Islam, deputy general manager of BB.

Islam said components in the banks’ capital market exposure will be restructured.

The development will enable banks to make fresh investments in stocks, although the stockmarket exposure ceiling remains unchanged at 25 percent of their capital, he said.

Earlier in December last year, the banks' capital given to their stockmarket subsidiaries were kept out of their stockmarket exposure.

The decision came into effect in January this year. But the move had failed to boost the capital market, which has been witnessing a steep fall in recent days.

The Banking Companies Act 1991, which was amended in 2013, has limited a bank's stockmarket exposure to 25 percent of its capital by July 21 this year.

The capital includes paid-up capital, share premium, statutory reserve and retained earnings.

Most of the banks' investments into the capital markets are within their limit, according to the BB. Of 56 banks, about 10 banks have over-investments in the stocks.

“The latest decision will help banks increase their capacity to invest more in the capital market,” another BB official told The Daily Star.

He said a notice will be issued in this regard next week.