The Asian Development Bank has asked the central bank to consult with the capital market regulator before it issues directives to banks on regulating their investment in stock business, a suggestion aimed at averting any panic among investors.\u00a0The recommendation of the manila-based regional development bank came after Bangladesh Securities and Exchange Commission raised concern over a recent notice of the central bank, issued in late February, limiting the banks\u2019 exposure in the capital market, a senior finance ministry official said.
\nThe two regulators\u2014one for banks and another to oversee capital market\u2014held a series of meetings over the effectiveness of the BB directive that affected the market for a brief period in both the bourses of the country.
\nThe ADB\u2019s capital market development programme mission that paid a week-long visit to Dhaka made its observation in its aide memoire last week.
\nThe central bank in its February directive asked the commercial banks to limit their total investment in the capital market on consolidated basis to minimise investment risk.
\nUnder the new provision, the market value of total investment of a banking group in the capital market on consolidated basis must not exceed 50 per cent of its consolidated paid up capital, balance in share premium account, statutory reserve and retained earnings, as stated in the latest audited financial statements.
\nThe banks have also been asked for taking necessary measures to gradually bring down their excess investment in the capital market by July 21, 2016.
\nAll investments of the banks, except the inter-company transactions, subscription to any fund intended for the capital market investment, market value of all capital market-leaning securities including shares, and margin loans and bridge loans provided by the subsidiaries, will be taken into consideration while calculating the banks\u2019 total capital market investment on consolidated basis.
\nSenior officials at the finance ministry said the unilateral directive issued by BB on stock business defied the instruction of the ministry that in late 2012 had asked BB and revenue board to hold prior consultations with the SEC in case they intended to issue directives to banks or brokerage houses relating to stock business.
\n\u2018The instruction was tailored by the finance ministry to have conformity in regulating capital market given the commission is the sole regulating entity on any stock investment,\u2019 the finance official told New Age on Saturday.
\nHe said the prescription of the ADB was given to stop panicky situation among investors and prevent any possible manipulation in the share market.
\nThe SEC officials said BB officials concerned who issued the February directive were unaware of the finance ministry\u2019s instruction.
\n\u2018We have supplied the finance ministry\u2019s instruction to BB to help stop any future misunderstanding,\u2019 Saifur Rahman, executive director of SEC, told New Age.
\nHopefully, the BB would adhere to the instruction and make prior consultation with the SEC in future if situation demands in the overall interests of the capital market, he added.<\/p>\n

-With New Age<\/strong> input<\/p>\n","protected":false},"excerpt":{"rendered":"

The Asian Development Bank has asked the central bank to consult with the capital market regulator before it issues directives to banks on regulating their investment in stock business, a suggestion aimed at averting any panic among investors.\u00a0The recommendation of the manila-based regional development bank came after Bangladesh Securities and<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","footnotes":""},"categories":[4],"tags":[],"yoast_head":"\n