BMBA requests BSEC
The Bangladesh Merchant Bankers Association has requested the capital market regulator that the investors having loans above Tk 1 crore in merchant banks and brokerage houses should be brought under the reporting of Credit Information Bureau of Bangladesh Bank to facilitate recovery of the margin loans. A BMBA letter sent to the Bangladesh Securities and Exchange Commission on November 20 made the request.
Merchant banks and brokerage houses during the year 2009-2010 had disbursed huge amount of margin loans to their clients without assessing the clients’ capacity.
After the market crash in 2010-2011, major amount of margin loans remained unrealised amid regulator’s bar on making forced sales.
The BMBA letter issued by its president Tanjil Chowdhury said, ‘To facilitate the recovery of huge defaulted margin loans, we propose that clients having loan with more than Tk 1 crore should come under CIB reporting as we do not have any other functional recourses.’
Asked, BMBA vice-president Akter H Sannamat told New Age, ‘Some investors, who received margin loans from certain merchant banks or brokerage houses, are now trading through other brokerage houses without repaying loans of the previous houses that made loan recovery difficult.’
‘If the individuals are brought under the CIB reporting, it may help the organisations to recover loans,’ he said.
The BMBA letter also sought another year till December 2015 for keeping provisioning at 20 per cent in three-month instalment against the losses the merchant banks and brokerage houses incurred during 2011-2012 after the market crash. The association sought the facility for the merchant banks and brokerage houses which might fail to comply with the BSEC’s previous directive.
In December 2013, the BSEC, following request from merchant banks and stockbrokers, allowed them to keep provision at 20 per cent in three-month instalment against the losses the firms incurred in 2012 and 2013 in five instalments.
The BSEC’s set deadline will end in December this year.
The BSEC in January last year, following appeal from the merchant bankers, had allowed to keep 100 per cent provision against their unrealised losses against their own portfolios and against the margin loans they issued to their clients in 2012 in five instalments.
In December 2012, the BB allowed some banks to keep 100 per cent provision in five instalments — each of 20 per cent — for unrealised losses against their own portfolio investments in the capital market.
-With New Age input
