SEC turns to banks to rescue market

The Securities and Exchange Commission (SEC) yesterday sought help of the central bank to rescue the stockmarket, which has been on a downswing since December last year.
The SEC wants the central bank to give directives to commercial banks to reinvest in the stocks, as they made hefty profits from the stockmarket last year.
The commission made the appeal to the Bangladesh Bank at a quarterly coordination meeting of different regulators, which also include Insurance Development and Regulatory Authority, and Registrar of Joint Stock Companies and Firms.
Governor Atiur Rahman chaired the meeting attended by the SEC chairman and its members, the IDRA chairman and its members and deputy governors of the central bank.
“We've sought written proposal from the SEC mentioning what it wants from the BB to revitalise the capital market,” said a senior official of the BB, who attended the meeting.
The meeting also discussed how mutual fund and insurers could invest more on government securities. The role of banks' directors, buy-back system and margin loan were also discussed at the meeting.
But the stockmarket situation dominated the discussion.
The SEC chairman expressed concern about the deteriorating market situation and said investors are losing confidence.
The Banking Companies Act 1991 allows banks to invest 10 percent of its liabilities (deposits) in the stockmarket. Now no bank has more than 2 to 3 percent of their liabilities invested in the stocks although most of the banks significantly over-invested till October-November last year.
“Yes, banks are allowed to invest 10 percent of their liabilities, but BB cannot force them,” the BB official told The Daily Star.
When contacted SK Sur Chowdhury, executive director of Bangladesh Bank, said the BB has reiterated its promise to cooperate with the securities regulator to vibrate the capital market.
General index of the Dhaka Stock Exchange reached its peak -- 8,900 points in November last year, which came down to 5,359 yesterday. The benchmark index had climbed by 80 percent only in 2010.
Some 33 lakh people -- many of them small investors -- have lost their money because of the plunging share prices.
Continued fall, sometimes sharp, is now a common phenomenon in the Dhaka's commercial hub Motijheel, making small-scale investors angry and forcing them to take to the streets.