The securities regulator has requested four state-owned commercial banks to inject fresh funds into the capital market through formation of special fund.
The Bangladesh Securities and Exchange Commission (BSEC) on Tuesday made the plea through separate letters issued to the banks' managing directors following the recent down trend of the country's capital market.
The state-owned commercial banks which have been requested to inject fresh funds through special fund are Sonali, Janata, Agrani and Rupali.
The securities regulator has also requested the banks to provide information regarding investments made through their portfolios as of April 18, 2022.
The BSEC spokesperson Mohammad Rezaul Karim said the securities regulator wants to know the information regarding the banks' investments made in the capital market along with assessing their capability of supporting the market.
"The objective of seeking fresh investment is to enhance the base of institutional investors in the capital market which is mainly dominated by retail investors," Mr. Karim said.
According to information of Bangladesh Bank (BB), 36 banks out of 61 have so far formed special funds and the aggregate amount of the funds is Tk 57 billion.
"Around 61 per cent of total size of the banks' funds have already been invested in the stock and green sukuk issued by Beximco," said the BB official on Wednesday.
The banks started investing in sukuk instruments after the BB had allowed them to invest in a private Green Sukuk bond from their special funds formed for investment in the capital market.
The securities regulator recently has requested another 28 banks to form special fund for supporting the stock market.
In its letters sent to the banks' managing directors on Tuesday, the BSEC said investor-base in Bangladesh Capital market is mostly dominated by retail investors having 80 per cent share in transactions.
"It is expected that institutional investors should dominate trading activities instead of retail ones to improve the stability of the country's stock market," said the BSEC letter.
On February 10, 2020 the central bank approved for forming a special fund worth Tk 2.0 billion by each bank for the purpose of investing in the stock market.
The investments made through special funds are not included in the banks' exposure to the stock market.
As per the BB's circular, a bank can create a five-year special fund with its own resources or with financing received from the BB through repo or re-financing schemes.
Funds from such a special fund are allowed to be invested in equity shares, mutual funds, bonds or debentures, and special purposes maintaining the prescribed criteria.
According to the BB circular, the banks are not required to make any provision for a decrease in the market value of their investments.
In later March, 2022 the securities regulator requested all banks to inject fresh funds within their stipulated limit to strengthen the base of institutional investors in the capital market.
According to the BB officials, the average exposure of all scheduled banks is around 15 per cent.
The Bank Companies Act, 1991, amended in 2013, set a bank's exposure to the stock market at 25 per cent of its capital which includes paid-up, share premium, statutory reserve and retained earnings.
