BB, BSEC defer decision on capital market fund dispute

| Updated: December 01, 2021 17:24:52

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A high-voltage meeting Tuesday between two regulators on the capital market agreed on bourse-boosting measures but deferred a decision on two pivotal issues of capital market stabilisation fund (CMSF) and dividend disbursement by losing banks and non-banks.

Officials said the Bangladesh Bank and the Bangladesh Securities and Exchange Commission expressed their solidarity to work jointly for resolving any complex issues through discussion for ensuring sustainable development of the country's capital market.

The consensus came at the joint meeting between high officials of both the central bank and the securities regulator at the BB headquarters in Dhaka, in the wake of some major problems confronting the capital market.

Deputy Governor of the BB AKM Sajedur Rahman Khan presided. Shaikh Shamsuddin Ahmed, a commissioner of the BSEC, led its three-member team at the crucial meet.

Complexities surrounding the capital market stabilisation fund (CMSF) and disbursement of dividend despite cumulative loss by banks and non-banking financial institutions (NBFIs) were on top of discussions at the meeting.

"After detailed discussion, the two sides decided to meet again in December for taking final decisions on the two contentious issues after scrutinizing relevant rules and regulations," according to briefing by officials.

Regarding application of the CMSF by banks and NBFIs in stock trading and disbursement of such dividend, the meeting agreed to bring amendment or correction to relevant notifications for compliance with the existing rules and regulations properly, the BB officials explained.

At an earlier meeting on September 13 this calendar year, the BB had ruled out application of the CMSF by banks and NBFIs, thus blocking bourse regulator's move aimed at wooing funds into the liquidity-hungry bourses.

The BB believes the rules on CMSF, issued by the BSEC through a gazette notification on June 27, are directly contradictory with the existing Banking Company Act.

The securities regulator had issued rules for the CMSF aiming to facilitate the country's stock market alongside settling investors' claims on undistributed or unsettled dividends.

In the notification on CMSF the BSEC said unclaimed cash dividend means any cash distributed to the investor (s) by way of dividend warrant or cheque or bank draft or by any other means, but not collected or claimed by the investor (s) to the issuer within a period of three years or more from the date of such distribution.

The BSEC has already asked the listed companies to transfer the funds into the CMSF account, in a measure to stabilize the market that of late was facing some volatility.

Earlier on October 02, 2019, the BSEC had issued a notification allowing all the listed companies to disburse dividend despite counting cumulative losses.

On the other hand, the central bank directed the banks on June 16 this calendar year not to comply with any regulations contradictory with the Banking Company Act or the instructions of the BB.

Besides, various issues like capital-market-exposure-calculation process, general bonds and perpetual bonds also came up prominently for discussion at the amity meet.

"It was a fruitful meeting," the BSEC commissioner told reporters after the détente was over.

Dr Ahmed also said: "We're working for the development of the capital market."

The BSEC commissioner said the central bank agreed in principle on some of the proposals made by the securities regulator. The proposals he listed include keeping banks' investments in bond out the purview of exposure limit.

"The central bank has also agreed in principle to calculate banks' exposure limit taking into account the cost prices of listed securities instead of their market prices," said Dr Shaikh Shamsuddin Ahmed.

He said the central bank assured that it would consider including the corporate-governance code in the bank company act.

"At the same time, listed banks will remain prepared to comply with corporate-governance code introduced by the securities regulator," said the BSEC commissioner.

He said the issue of bank's cash dividend was also discussed at Tuesday's meeting. The securities regulator is in favour of issuing cash dividend by the banks from the profit of current year.

"The central bank said they will work to pave the way for issuing cash dividend from the profit of current year," said Mr. Ahmed.

At the meeting, the central bank expressed its dissatisfaction over non-compliance of some banks that crossed their exposure limit by investing in stocks through the Investment Corporation of Bangladesh (ICB).

"The central bank will look into the non-compliance by those banks," said the BSEC commissioner, billing the meeting with the central bank as very successful.

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