The Financial Express

Bangladesh Bank asks to calculate investment limit at purchase price of stocks 

| Updated: August 07, 2022 10:09:36

FE file photo FE file photo

The investment limit (exposure limit) of banks in the capital market will now be calculated at the purchase price instead of the market price, according to the Bangladesh Bank (BB). 

The central bank issued a circular saying that the purchasing price of shares of other companies, mutual funds, debentures and corporate bonds will be considered during the counting of the highest exposure limit of banks.  

Earlier, the finance ministry through a letter urged the Bangladesh Bank governor to allow the cost price of share purchase as their exposure limit.  

At present, banks' exposure limit in the stock market is calculated on the market price instead of the cost price. As a result, if the stock market index or share price increases, the exposure limit of the bank is exceeded.  

So, banks are forced to sell shares to stay within this limit. As a result, the index fell due to selling pressure in the bullish stock market.  

Banks are major institutional investors in the bourses of Dhaka and Chattogram, their selling pressure hinders the market rallies every now and then. 

Banks can invest in listed securities up to 25 per cent of their equity on a solo basis and 50% on a consolidated basis, according to the Bank Companies Act. 

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