BB softens tone in row with BSEC
The central bank may allow banks and non-bank financial institutions to channel the undistributed dividends to the stock market stabilisation fund, in a softening of stance that would end its dispute with the stock market regulator.
If materialised, it would also put an end to the volatility in the stock market, which fell in the seven days out of the last eight sessions.
The Bangladesh Bank had confusion about some wording in the related order that "we have cleared," said Shaikh Shamsuddin Ahmed, a commissioner of the Bangladesh Securities and Exchange Commission (BSEC), after a meeting with the central bank.
"It was a positive and fruitful meeting."
A senior BB official, who attended the meeting, however, said no concrete decisions were taken.
The two entities would sit again in December in the greater interest of the stock market, he said.
"If required, the central bank will take measures to amend its decisions so that investors get back their confidence in the capital market."
Ahmed led a three-member BSEC team at the meeting at the central bank headquarters, while the host side was led by Deputy Governor AKM Sajedur Rahman Khan.
The meeting between the two regulators was arranged to solve two disputed issues.
One is over the participation of banks and NBFIs in a BSEC capital market stabilisation fund. The other relates to a commission order allowing dividends from the profits of the recent financial year even if there are accumulated losses.
The row emerged after the central bank ordered the listed banks and NBFIs not to follow the BSEC orders.
"We talked with the central bank and they realised the issues," Ahmed said.
He added that the central bank had agreed to consider the market exposure of banks and NBFIs on the basis of the cost value of their investments in the stock market instead of the market value of the shares.
The BB had also agreed to allow the lenders to exclude their bond investment from the calculation of the exposure, he said.
Banks and NBFIs face ceiling when it comes to investment in the stock market, and it is measured by the market exposure.
Currently, the exposure is computed on the basis of the market value of securities, so when the stock rises, banks and NBFIs are forced to sell to adjust to the exposure limit.
The central banker, however, said: "We discussed the merits and demerits of considering the exposure limit on the basis of the cost value. But no decision was taken."
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