BB softens the tone in line with BSEC

The central bank could allow banks and non-bank financial institutions to channel undistributed dividends to the stock market stabilization fund, in a loosening that would end its dispute with the stock regulator.

If it materialized, it would also put an end to stock market volatility, which has plummeted in the seven days of the past eight sessions.

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The Bangladesh Bank has been confused about some wording of the related order that “we have authorized,” said Shaikh Shamsuddin Ahmed, commissioner of the Bangladesh Securities and Exchange Commission (BSEC), after a meeting with the bank central.

“It was a positive and fruitful meeting.

A senior BB official, who attended the meeting, however, said no concrete decision had been taken.

The two entities would sit again in December in the best interests of the stock market, he said.

“If necessary, the central bank will take steps to change its decisions so that investors regain their confidence in the capital market.”

Ahmed led a three-member BSEC team during the meeting at the central bank headquarters, while the host side was led by Deputy Governor AKM Sajedur Rahman Khan.

The meeting between the two regulators was organized to resolve two controversial issues.

One concerns the participation of banks and NBFIs in a BSEC capital market stabilization fund. The other concerns a commission order authorizing dividends on the profits of the past financial year even if there are cumulative losses.

The row erupted after the central bank ordered listed banks and NBFIs not to follow BSEC’s orders.

“We spoke with the central bank and they understood the issues,” Ahmed said.

He added that the central bank had agreed to consider the market exposure of banks and NBFIs on the basis of the cost value of their investments in the stock market instead of the market value of stocks.

The BB had also agreed to allow lenders to exclude their bond investment from the exposure calculation, he said.

Banks and NBFIs face a cap when it comes to investing in the stock market, and it is measured by market exposure.

Currently, exposure is calculated based on the market value of the securities, so when the stock rises, banks and NBFIs are forced to sell to fit the exposure limit.

The central banker, however, said: “We have discussed the pros and cons of considering the exposure limit on the basis of cost value. But no decision has been made.”

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