Bangladesh Bank directive to boost capital market

The capital market requires stimulus to attract new companies to be listed. Public Private Partnership initiatives can also raise the required funding from the capital market

Bangladesh Bank in a recent move to boost the capital market has given certain relaxation to the financial institutions’ exposure in the capital market. As per the Banking Companies Act 1991, amended in 2013, a financial institution can take exposure up to 25 per cent of the equity in capital market. The equity includes paid up capital, share premium, statutory reserves and retained earnings. From January 2016 onwards the financial institutions' investment in its subsidiaries/ merchant banks will not be included in the capital market exposure.
What is the impact? 33 out of the total of 51 merchant banks are owned by financial institutions where the total equity amounts to BDT 8,000 crore (paid up capital is BDT 5,800 crore). This in turn means the financial institutions who were under compulsion to bring down their exposure either by trigger sales or increasing equity will now be able to use the new methodology to increase /maintain the exposure in the capital market.
Bangladesh has recorded GDP growth in excess of 6 per cent pa for almost 10 consecutive years. The country ranks 33rd in terms of GDP Purchasing Power Parity and 44th in terms of nominal GDP.  Almost 70 per cent of the population is in active work age gives the country a competitive advantage. The broad sectoral contribution to GDP is agriculture (19 per cent), industry (30 per cent) and service (51 per cent). With the attainment of self sufficiency in food by way of contribution, the exports doing well from our RMG sector and remittances from our hard working Non Resident Bangladeshi workers abroad; the major area of investment is infrastructural development. There is a huge requirement of funds which can be raised from the domestic sources. Capital market can play a pivotal role. The total number of listed companies is a meagre 285 and capital raised is USD 33 billion while the country GDP of USD 209 in 2015 also shows a very sorry position.
The capital market requires stimulus to attract new companies to be listed.
Public Private Partnership initiatives can also raise required funding from the capital market.
The recent steps taken by the central bank is a way forward to promote the capital market. Even if we extrapolate at the present rate of growth, Bangladesh will be among the top 20 economies in GDP on purchasing power parity within next 5/7 years and among the middle income economy in the not too distant future.

The writer, a banker by profession, has worked in both local and overseas markets with various foreign and local banks in different positions

 

Bangladesh Bank directive to boost capital market

The capital market requires stimulus to attract new companies to be listed. Public Private Partnership initiatives can also raise the required funding from the capital market

Bangladesh Bank in a recent move to boost the capital market has given certain relaxation to the financial institutions exposure in the capital market. As per the Banking Companies Act 1991, amended in 2013, a financial institution can take exposure up to 25 per cent of the equity in capital market. The equity includes paid up capital, share premium, statutory reserves and retained earnings. From January 2016 onwards the financial institutions investment in its subsidiaries/ merchant banks will not be included in the capital market exposure. What is the impact? 33 out of the total of 51 merchant banks are owned by financial institutions where the total equity amounts to BDT 8,000 crore (paid up capital is BDT 5,800 crore). This in turn means the financial institutions who were under compulsion to bring down their exposure either by trigger sales or increasing equity will now be able to use the new methodology to increase /maintain the exposure in the capital market. Bangladesh has recorded GDP growth in excess of 6 per cent pa for almost 10 consecutive years. The country ranks 33rd in terms of GDP Purchasing Power Parity and 44th in terms of nominal GDP. Almost 70 per cent of the population is in active work age gives the country a competitive advantage. The broad sectoral contribution to GDP is agriculture (19 per cent), industry (30 per cent) and service (51 per cent). With the attainment of self sufficiency in food by way of contribution, the exports doing well from our RMG sector and remittances from our hard working Non Resident Bangladeshi workers abroad; the major area of investment is infrastructural development. There is a huge requirement of funds which can be raised from the domestic sources. Capital market can play a pivotal role. The total number of listed companies is a meagre 285 and capital raised is USD 33 billion while the country GDP of USD 209 in 2015 also shows a very sorry position. The capital market requires stimulus to attract new companies to be listed. Public Private Partnership initiatives can also raise required funding from the capital market. The recent steps taken by the central bank is a way forward to promote the capital market. Even if we extrapolate at the present rate of growth, Bangladesh will be among the top 20 economies in GDP on purchasing power parity within next 5/7 years and among the middle income economy in the not too distant future. The writer, a banker by profession, has worked in both local and overseas markets with various foreign and local banks in different positions