The Financial Express

BSEC backs exclusion of banks' bond investments

| Updated: November 28, 2021 16:45:36

BSEC backs exclusion of banks' bond investments

The securities regulator would request Bangladesh Bank (BB) to exclude banks' investments in perpetual bonds from their exposure on bourse, in a measure meant for increasing liquidity supply to the capital market.

Sources say the Bangladesh Securities and Exchange Commission (BSEC) will raise the issue, among others, at a meeting scheduled to be held with the central bank Tuesday.

A senior official at the BSEC said the proposal is being mooted so that the banks' investment in the bond market does not get squeezed due to the exposure limit and the bond market remains vibrant.

Under the existing provision, such investment is considered included in the banks' exposure to the capital market as soon as the bonds are listed with the stock exchanges.

It is now mandatory for the perpetual bonds to be listed with bourses. The securities regulator has so far allowed 15 banks to issue perpetual bonds.

A senior official said the BSEC would try to convince the BB to deduct such investments by banks from their respective exposure limits. "The banks will then be able to play more supportive role in the stock market."

Meanwhile, the securities regulator asked the issuers to accelerate the process of listing perpetual bonds on bourses. Presently, subscriptions of two such bonds are going on.

According to the central bank sources, the banks invested Tk 31 billion, as of June 30, 2021. Presently, the amount would stand at around Tk 50 billion.

Asked, managing director of Pubali Bank Limited Safiul Alam Khan Chowdhury said that it would be better for the banks if the investments made in perpetual bonds are kept beyond the exposure limit.

"The banks issues bond to raise capital. The banks also facilitate mobilising subscription of perpetual bonds issued by their pair companies," he added.

He said the banks' investment will hit their exposure limit if the investments in perpetual bonds are included.

"In that case, the banks will face limitations in case of completing the subscription to the perpetual bonds," he said.

At Tuesday's meeting, the securities regulator will also lay importance on the issuance of cash dividend by the listed banks through resolving the existing complexities.

In this regard, the BSEC commissioner Dr Shaikh Shamsuddin Ahmed said many banks had issued stock dividend year after year.

"Investors' scope of availing dividend will be reduced gradually due to large paid-up capital expanded through stock dividend."

He said the securities regulator wants to inspire banks through the central bank in issuing cash dividend for the sake of investors and stock market.

At Tuesday's meeting, both the regulators will discuss as to how some complexities can be settled to accelerate the operations of capital market stabilisation fund (CMSF).

On June 27 last, the securities regulator had issued rules for the CMSF through a gazette notification to help revitalise the capital market.

The objective of the CMSF is to support the country's stock market alongside settling investors' claims on undistributed or unsettled dividends.

Meanwhile, the securities regulator has allowed the fund to invest Tk 1.0 billion into the Investment Corporation of Bangladesh (ICB) as TDR (transferable development rights) to boost liquidity flow into the capital market.

The issues which remained unsettled in previous meeting held with the central bank will also be discussed at Tuesday's meeting.

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