Banks’ special fund designated for stock-market investment survives two more years until December next year as the regulator renews its tenure amid entreaties from stakeholders and fears of securities selloffs, officials said.
After deciding to extend the tenure last week, they added, the central bank in a letter sought approval from the ministry of finance to keep the investments from the fund beyond the banks’ capital-market exposure until the new tenure expires.
A senior official of the financial institutions division told the FE that the ministry got down to working on it in line with the central bank’s proposal.
The tenure of the fund was valid until February 9 this year.
“The tenure of the fund has been extended based on views from the stock-market-related various stakeholders and banks that invested in the special fund — and central bank’s own evaluation — and for overall stability of stock market and the financial sector of the country,” the Bangladesh Bank wrote in the letter.
The government formed the special fund on February 10, 2020 amid stock-market downturn with contribution of Tk 2.0 billion from each bank wherefrom the banks can borrow and invest in securities on the bourses.
The fund was formed to help stabilise the stock markets through enhancing liquidity flow.
Until December 2024, some 38 banks had contributed Tk 60.96 billion to the fund. The banks borrowed Tk 36.74 billion from the fund and invested in stocks. Since a large amount of money remained idle, the government decided not to expand the fund anymore.
The central bank considered that if the tenure of the fund expired and the participatory banks withdrew the large sum invested in the bourses, the stock markets will see negative impacts from huge selloffs.
Moreover, the banks will incur huge financial losses as the selling price of majority securities will be lower than the buying price. They will thus have to make additional provisioning against the unsold securities.
Earlier in late November, Bangladesh Securities and Exchange Commission (BSEC) requested the central bank to extend the tenure of the fund for five more years, until February 2030.
Also, the BSEC requested raising the size of fund by enhancing bank’s contribution to Tk 3.0 billion instead of Tk 2.0 billion.
Later this January, the Dhaka Stock Exchange Brokers Association (DBA) also requested the central bank to extend the tenure of the fund for five more years.
The association of stockbrokers also demanded raising the size of fund to help increased liquidity flow across the bourses.
https://today.thefinancialexpress.com.bd/first-page/banks-special-securities-fund-stays-two-more-years-1741113195
