Bangladesh Banks Show Little Interest in Stock Market Investment

Source: Regulation Asia Duruthu E Chandrasekera, Regulation Asia 2020-07-16

Despite a central bank programme offering credit support for banks to invest in the stock market, banks are showing little interest in participating.

Bangladesh banks have stopped seeking credit support from the central bank for capital market investments amid a slump in the stock market, sources said.

Bangladesh Bank told banks in February it would provide them credit support at a 5 percent interest rate to set up the new funds to invest in the stock market, whereby each fund would be worth BDT 2 billion (USD 23.6 million) and also draw on the banks’ own resources. The move was part of efforts to boost Bangladesh’s sagging capital market.

At the end of June, banks were reportedly asked to inform BSEC (Bangladesh Securities and Exchange Commission) of their progress in setting up these funds.

According to Regulation Asia sources at Bangladesh Bank, only 13 out of 60 listed and non-listed banks in the country have so far formed such funds – worth a total BDT 16.5 billion. Only two banks received credit support from the central bank package, worth just BDT 1.3 billion.

“The ongoing pandemic and economic fallout has discouraged lenders to invest in the market right now,” an official said. “So, the process has come to a halt.”

As an added incentive, Bangladesh Bank had said in February that investment into the stock market made from the newly-set up funds would be considered ‘special investment’, meaning it would not count towards banks’ maximum allowed stock market exposure of 25 percent of capital.

“This wasn’t attractive for banks as the stock markets are weak,” the Bangladesh Bank official added.

Bangladesh Bank

Bangladesh Banks Show Little Interest in Stock Market Investment

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