- Pursuant to section 26KA of ‘ ব্যাংক-কোম্পানী আইন, ১৯৯১ (২০১৩ পর্যন্ত সংশোধিত)’, DOS Circular No. 02 dated 16.09.2013 has been issued to clarify issues related to individual and aggregate limits of investment in shares of any company or companies by banks. International best practice requires that capital adequacy, risk measurement, and management be done on a consolidated basis. In order to strengthen the capital base of the banks in Bangladesh by keeping their capital market risk within acceptable limit, the following additional instructions are issued:
(1). The market value of total investment of a banking company in capital market on consolidated basis shall not exceed 50% of the sum of its consolidated paid up capital, balance in share premium account, statutory reserve and retained earnings as stated in the latest audited financial statements. While computing total capital market investment on consolidated basis, the following components shall have to be considered:
- a) all components mentioned in Para 2(1) of DOS Circular No. 02 dated 16.09.2013 except the inter-company (parent bank to subsidiary/subsidiaries or vice versa) transactions;
- b) subscription by the subsidiary or subsidiaries of the bank to any fund intended to invest in the capital market;
- c) market value of all types of shares, debentures, corporate bonds, mutual fund units and any other capital market leaning securities held by the subsidiary or subsidiaries of the bank;
- d) margin loan (outstanding) provided to the customers by the subsidiary or subsidiaries of the bank;
- e) bridge loans provided to companies by the subsidiary or subsidiaries of the bank against expected equity flows/issues.
(2). All components mentioned in Para 2(2) of DOS Circular No. 02 dated 16.09.2013 shall be excluded while computing total capital market investment on consolidated basis.
- Banks having total capital market investment above the consolidated limit set in Para 1(1) shall have to bring it down gradually within 21.07.2016.
- Banks shall submit a report (both soft and hard copy) of their month end solo and consolidated basis position regarding capital market investment in the prescribed formats to Department of Off-site Supervision (DOS) within the 10th of the following month. The formats provided with DOS Circular No. 02 dated 16.09.2013 are suitably revised to enable the banks to report both positions in one format. The soft copy of the formats can be collected from DOS.
This shall come into effect immediately and the formats provided with DOS Circular No. 02 dated 16.09.2013 shall be considered revised.