Stocks
BSEC nudges to except bonds from capital market exposure
Bangladesh Securities and Exchange Commission, BSEC has recently sought the Bangladesh Bank for the 2nd time to exclude fixed-income securities – bonds, Sukuks and asset-backed securities – while calculating the capital market exposure of banks.
BSEC spokesperson and Executive Director Rezaul Karim said fixed-income securities are less erratic than shares and have lower extent of capital gain or loss. This is why the BSEC asked the central bank to exclude them while calculating exposure.
In terms of Bangladesh Merchant Bankers Association President Md Sayadur Rahman, the investment capacity of banks is dropping because of the listing of bonds on the capital market.
“Since they are not erratic, all types of bonds should be kept out of exposure calculation,” he added.
Ershad Hossain, managing director of the City Bank Capital Resources Limited, said the Bangladesh Bank should revisit the inclusion and exclusion of different asset classes that is equity, quasi-equity, and debt securities in the capital market exposure in a rational manner, instead of considering them on the basis of capital market listing.
“My logic is, if you list a bond, it will create an opportunity for bondholders to exit by selling its units, rather than waiting for it to mature,” he said.
In September this year, the Bangladesh Bank informed the securities regulator that banks have more chances to invest in the capital market, particularly in bonds.
Previous week, Treasury bonds, which are out of the capital market exposure limit, went live on trial trading in the bourses.
On the contrary, perpetual bonds are issued to raise AT1 capital to comply with the central bank’s Basel III guidelines. These bonds will include exposure when it will be listed on the stock exchanges.
6 perpetual bonds are already listed on the bourses which are included in the capital market exposure.
In August this year, the Bangladesh Bank allowed banks and non-bank financial institutions (NBFIs) to calculate their capital market exposure based on the cost of investments, instead of the market price of their held securities.
After that, banks and NBFIs do not need to sell shares to stay within their exposure limit after capital gain.
The central bank responded to repeated requests from the securities regulator and the investment industry as they believed the measure would help stabilize the capital market.
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