Merchant bankers urged Bangladesh Bank to allow submission of reports regarding money-market transactions monthly instead of daily for the sake of the country's bourses.
Central bank officials, meanwhile, balked at the plea on grounds that the regulator ought to monitor fund movements in and out of the market for monetary propriety.
Bangladesh Merchant Bankers Association (BMBA) made the plea in a letter to central bank Monday. And stockbrokers and stakeholders also joined the fray over the matter.
"We think the stock-market-related information can be submitted on monthly basis subject to a coordination maintained with the securities regulator. Otherwise, wrong message can be spread in the market," the BMBA said in its letter.
BMBA's request came days after the central bank had issued a directive asking banks to submit reports on money-market transactions on a daily basis.
The reports will also include the banks' investments made in the stock market.
"The news regarding the BB's directive on submission of the reports on daily basis has been published in media in different ways. This has created panic among the investors," BMBA said in its letter.
The association of the merchant bankers said compliance with the submission of investment-related reports by 5.0pm is impractical as the market operators' regular jobs of transactions and post-transactions continue till 3.45pm.
"The market intermediaries have to work till 5/6pm to complete the post-transaction jobs. So, submission of transaction-related information on daily basis is impractical," the BMBA says.
It says the central bank will have to keep stock-market's stability in its consideration alongside regulating the money market.
"Because, any kind of decision will be one-sided if the matter of greater interest is considered there," the BMBA letter reads.
The merchant bankers find the country's stock market presently in a suitable position compared to other countries'.
However, when contacted, a senior BB official familiar with the matter told the FE that the central bank still sticks to its directive regarding submission of reports on money markets along with capital-market exposure of banks on a daily basis.
"We're not thinking about reviewing the issue at all," a senior official of the Bangladesh Bank told the FE Monday while replying to a query.
The instructions came into effect from Monday as the banks started submitting the required information on money-market truncations as well as capital-market exposures of the banks, according to the official.
The official further said: "We're providing technical supports to the banks concerned for submitting the required information accurately in line with the prescribed format."
Earlier on August 12, the central bank asked the banks to submit their daily reports on own, subsidiaries and others' net exposures on the capital market in line with a prescribed format within 5:00pm each working day.
All the scheduled banks have also been instructed to submit information on short-term loans or placements with names of the clients to the Department of Offsite Supervision (DOS) of the central bank within the same timeline of each working day.
The central bank has taken the latest moves for ensuring proper liquidity management in the banking system as well as keeping track of fund movement in and out of the market, they added.
The latest BB moves came against the backdrop of issuance of a forewarning as part of a precautionary measure to avert possible 'asset bubbles' with a note for the banks to check diversion of funds into unproductive sectors.
Also, the commercial banks have already been instructed to ensure right end-use of the funds through conducting necessary inspections by their internal audit departments.
The central bank had found a portion of funds under the stimulus packages being diverted and used for unproductive purposes instead of proper utilization in the selected respective sectors.
In some cases, borrowers have adjusted his/her other credits with loans under the low-cost funds, the BB said in its two-page letter conveyed to the banks on July 25.
Meanwhile, the latest directives issued separately by the two regulators-the BB and the BSEC-have created worries among the stakeholders concerned.
Lack of their mutual coordination might affect both the money market and the stock market, opined market operators and experts.
On Thursday, the Bangladesh Bank (BB) issued a directive for all the scheduled banks, setting the provision of submitting reports regarding their money market transactions on daily basis.
On Friday, the Bangladesh Securities and Exchange Commission (BSEC) issued a directive allowing the stockbrokers to disburse margin loans as per the existing highest ratio to keep liquidity flow unaffected.
Previously, the two regulators were not able to reach a consensus on compliances of the banks and financial institutions with the corporate-governance codes set by the securities regulator.
Taking these into consideration, the market operators and experts emphasised proper coordination between the central bank and the securities regulator.
"I think there is a lack of understanding between the regulators. Both the regulators should take decisions on the basis of consensus to avert any kind of negative impact on the stock market," said Dr A B Mirza Azizul Islam, a former adviser of caretaker government.
The reports, to be submitted as per the BB's directive on Thursday, would also include the banks' investments made in the stock market.
As per the directive issued by the BSEC on Friday, the stockbrokers would be able to disburse margin loans as per the existing highest ratio.
Now, an investor will get margin loans at 1:0.8 ratio until the DSE broad index exists below 8,000 points. Previously, the margin loans were disbursed at 1:0.8 ratio until the index had existed below 7,000 points.
Asked, Md. Sirajul Islam, a BB spokesperson and executive director, said their target was to ensure proper implementation of the loans disbursed under the stimulus packages, as the government is giving subsidy for such loans.
"The government offered loans at a minimum interest to keep investments unaffected amid the coronavirus pandemic. The objectives of the package will not be implemented if someone purchases luxury cars or lands with the loans received at minimum interest." Mr Islam told the FE that their initiatives were taken for the sake of ensuring discipline on the money market.
"The capital market is not our target, and the issues of two markets should not be mixed up."
Asked whether anyone purchased cars or lands with the loans taken under the stimulus packages, the BB spokesperson said they would conduct investigations following some complaints.
Mohammad Rezaul Karim, a BSEC spokesperson, said a circular was issued in 2010 regarding maintaining proper coordination among the regulatory bodies in case of taking any decision that might leave any impact on the stock market.
"We have nothing to say about the BB's directive issued to ensure discipline on the money market. But we believe that any decision taken on the basis of consensus will facilitate growth of both the markets," Mr Karim added.
The objective of the BSEC's directive was to keep liquidity flow into the stock market unaffected.
Speaking on the BSEC's latest directive, Dr Mirza Azizul Islam, also a former chairman of the securities regulator, said margin loans should be relaxed only for the shares having good fundamentals.
"The scope of credit facilities should not be extended for weak companies amid the ongoing upward trend of the market," he added.
A top official of the securities regulator, however, refused to make any comment on the BB directive, saying that they want to maintain a good relation with the central bank.
On June 16, the BB sent a letter to the BSEC chairman to amend or fine-tune its directives issued under the corporate governance code (CGC) for the listed banks and financial institutions (FIs).
In its letter, the central bank said the banks and FIs, formed and operated under different laws, had no scope to comply with such directives.
Talking to the FE, the BSEC official then said there was no scope for scrapping or amending the directives as those were issued to ensure better corporate governance for all the listed companies.
"Both the regulators should have proper understanding in case of taking any decision regarding the stock market," said Azam J Chowdhury, president of the Bangladesh Association of Publicly Listed Companies (BAPLC).
The listed companies are in a fix in case of complying with the CGC set by the securities regulator, he noted.
"The BSEC will take measures against the companies over non-compliance with the CGC. On the other hand, the BB will not accept such compliance."
Mr Chowdhury opined that the problem can be solved easily if both the regulators sit together and reach a consensus that the compliance provisions of the primary regulator should not contradict the regulations of other regulators.
"The stock market should also be allowed to move in accordance with its strength," Chowdhury added while speaking about the BB's directive on submission of daily reports by the banks.
Md. Sayadur Rahman, president of the Bangladesh Merchant Bankers Association (BMBA), said it was difficult to comply with the BB's directive regarding submission of reports on daily basis.
"It will take one day to submit the reports to the parent companies. So, it's very difficult to comply with the BB directive," he mentioned.
Dhaka Stock Exchange (DSE), meanwhile, posted new records in six market parameters on Monday, including all indices, riding on an increased participation of buoyant investors.
The prime index - DSEX - settled at 6,628, the highest since its inception more than eight years back in 2013, with a rise of 0.48 per cent or 32.06 points.
On the day, the DSE also hit fresh records in market capitalisation, trade volume and total number of trades executed.
The turnover hit over a 10-year high at Tk 29.39 billion. It was also the second- highest turnover in the DSE history. The all-time high turnover on the DSE was Tk 32.49 billion, recorded on December 5, 2010.
