Merchant bankers offer recipe to prop up markets
Merchant banks meet SEC with a set of recommendations today
Some
stock investors stage a sit-in in front of Dhaka Stock Exchange in the
busy commercial hub of Motijheel yesterday to protest a market fall.
Street protests halted traffic for three hours.Photo: STARBangladesh Merchant Bankers' Association (BMBA) will urge the Securities and Exchange Commission (SEC) at a meeting today to allow merchant banks to raise their own funds to invest in the market.
“We are facing a credit crisis. We don't have our own funds as we are subsidiary companies,” said Mohammad A Hafiz, president of BMBA.
Many merchant banks failed to provide credit to stock investors due to the so-called single-party exposure limit set by the central bank.
According to Bangladesh Bank, financial institutions are not allowed to lend more than 15 percent of their 'investable' amount to a single borrower.
The tight single party exposure pushed merchant banks into a liquidity crisis as their parent companies failed to supply adequate funds to their subsidiaries (merchant banks) for lending to borrowers, said Hafiz.
The concerns spelt by the association underline deeper volatility in the market. The benchmark index of Dhaka Stock Exchange suffered a 1.61 percent fall yesterday.
“Investor confidence and liquidity inflow are important to bring normalcy back to the markets,” Hafiz said.
He urged all stakeholders to work together to boost investor confidence.
BMBA will sit with the SEC today on how to stabilise the market as early as possible.
The association will urge the SEC to extend the adjustment period of single-party exposure to 2014.
Most merchant banks will then get enough time to adjust their single-party exposure if the regulator approves it, Hafiz added.
“We will also urge the regulator to allow us to raise our own funds to invest in the market.”
Merchant banks failed to raise capital due to some legal restrictions as the ownership of the subsidiary companies was not separated from their parent companies, Hafiz said.
“Securities rules should be changed. Then we can go to sponsors and companies to raise funds,” he said.
Meanwhile, the SEC approved the dividends of Grameen One Mutual Fund and Grameen One: Scheme Two.
Trading of two mutual funds starts today, said Saifur Rahman, executive director of SEC.
The trading of the two funds was suspended on August 25 by DSE as they declared dividends without approval from SEC.