Southeast Bank fined Tk 10 lakh for flouting stock rules

The Bangladesh Bank has imposed a fine of Tk 10 lakh on Southeast Bank for breaching rules by making an excessive amount of investment in a single company in the stock market.

The private commercial bank was the latest lender to have faced penalty for breaching security rules.

Southeast Bank parked 22.05 per cent of its paid-up capital with National Life Insurance Company Ltd (NLICL), in clear violation of the Bank Company Act 1991, according to a central bank probe.

A lender is allowed to invest a maximum of 10 per cent of its paid-up capital and 5 per cent of the total capital in a company.

The investment made by the bank in NLICL was 9.83 per cent of the total capital, said the report. The paid-up capital of the bank stands at Tk 1,188 crore.

The higher-ups of the two companies – Southeast Bank and NLICL –colluded with each other, it said.

Alamgir Kabir, chairman of Southeast Bank, is currently playing the role of an adviser of NLICL, while Zakir Ahmed Khan, an independent director of the insurance company, is an adviser of the bank.

The central bank earlier warned the bank of its excessive investment, asking it to comply with the Bank Company Act by reducing the exposure.

The bank informed the central bank in September that it had sold 23.40 lakh shares in phases.

In addition, the lender sought another six months to sell the rest of the shares in order to follow the rules.

But, the central bank's probe found that the shares were transferred from one account to another account of the bank, the BB document said.

Southeast Bank has resorted to trickery as the actual sales of the shares did not take place, it said.

The BB will fine Southeast Bank Tk 50,000 per day until it brings down the number of shares in line with the regulatory ceiling.

Contacted, Alamgir Kabir said that he had followed compliance throughout his life.

"I did not violate any rules. I am just an honorary adviser of the insurance company."

"Once, I was an independent director of the company. Later, I resigned as a bank director can't hold the same position in any other financial institution. I do not have any investment in the insurance company."

Anwar Uddin, acting managing director of the bank, said that there had been some miscalculation as the lender invested 13.82 per cent of its paid-up capital in NLICL.

"We have appealed to the central bank to consider the issue," he said.

The bank has already cut down the number of shares to some extent and will comply with the rule in the quickest possible time, he said.

In September, the BB fined NRB Bank Tk 49.50 lakh for breaching securities rules by buying the shares of Pioneer Insurance beyond the investment ceiling.

The central bank also imposed a fine on NRB Commercial Bank for its aggressive investments in the capital market in breach of laws.