Regulatory Alerts2015-06-28
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DOS Circular Letter No. 10: Amendment of DOS Circular Letter No. 03/2015 regarding maintenance of provision against investment in Mutual Fund Units by scheduled banks
The Department of Off-Site Supervision amends the policy for maintaining provisions against potential value reduction in open-ended mutual fund units held by scheduled banks. Banks are required to maintain a provision only if the average purchase price exceeds 95% of the current net asset value; otherwise, no provision is needed. The provision amount is calculated as the difference between the average purchase price and 95% of the current net asset value.
Bangladesh Bank Head Office P.O. Box 325 Dhaka. Department of Off-Site Supervision DOS Circular Letter No.- 10 Date: --------------------- To: The Chief Executive Officers All Scheduled Banks operating in Bangladesh.
Dear Sir,
Regarding the amendment of DOS Circular Letter No. 03 issued on March 12, 2015, concerning the maintenance of provision against loss due to decrease in value of Mutual Fund Units held by Banks.
DOS Circular Letter No. 03 was issued on March 12, 2015, regarding the maintenance of provision against loss due to decrease in value of both term (fixed-term) and open-ended Mutual Fund Units held by Banks. Considering the prevailing situation and further discussions with various market participants, it has been decided to adopt the following guidelines instead of the existing guidelines mentioned in the aforementioned DOS Circular Letter No. 03/2015, regarding the maintenance of provision against possible loss due to decrease in value of various open-ended Mutual Fund Units held by Banks:
Maintenance of Provision against Investment in Open-ended Mutual Funds
If the average purchase price (AP) of the concerned Mutual Fund Unit is less than or equal to 95% of the Net Asset Value (NAV) determined at the current market price of that Unit at that time (AP ≤ NAV * 0.95), there will be no need to maintain any provision. Otherwise (AP > NAV * 0.95), the provision shall be maintained as follows:
Provision to be maintained (P) = Average Purchase Price of the Unit (AP) - 95% of the Net Asset Value (NAV * 0.95) determined at the current market price.
The above instructions shall come into force immediately. The relevant part of DOS Circular Letter No. 03/2015 shall be considered repealed, and other instructions shall remain unchanged.
Yours faithfully,
(Signature) (A.S.M. Robiul Hasan) General Manager Phone: 9530093 14 Asharh, 1422 Bangabda 28 June, 2015 AD
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