Regulatory Alerts2022-08-04
Added
DOS Circular Letter No. 30: Regarding Exposure Limit of Banks in Capital Market
The Department of Off-Site Supervision (DOS) of Bangladesh Bank mandates that for calculating the maximum exposure limit of banks' shareholdings in other companies under Section 26C(1) of the Banking Company Act, 1991, the purchase price paid by the bank must be treated as the 'market value'. This directive applies to shares, corporate bonds, debentures, mutual funds, and other capital market instruments. The instruction takes immediate effect and supersedes previous valuation methods outlined in DOS Circular No. 02/2013 and DOS Circular Letter No. 07/2014, while leaving other provisions of those documents unchanged.
Department of Off-Site Supervision Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh 20 Srabon, 1429 Bangabda DOS Circular Letter No. 30 Date: --------------------------- 04 August, 2022 AD Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh.
Dear Sir,
Regarding the total investment limit of bank-companies in the capital market.
In accordance with Sub-section (1) of Section 26C of the Banking Company Act, 1991 (amended up to 2018), clarifications regarding the maximum limit of shareholding in any single company or collectively by a bank-company in the shares of other companies, and the maximum limit based on risk-weighted assets, have already been issued through DOS Circular No. 02/2013 and DOS Circular Letter No. 07/2014, which are currently in force. Now, after consultation with the Government, it has been decided that in determining the upper limit (Maximum Exposure) of shareholding on both risk-weighted and non-risk-weighted bases in the aforementioned circular/circular letter, the following instructions shall be followed for calculating the 'market value' of the relevant shares, corporate bonds, debentures, mutual funds, and other capital market instruments:
"For the purpose of fulfilling the objective of Sub-section (1) of Section 26C of the Banking Company Act, 1991, when determining the upper limit (Maximum Exposure) of investment in the capital market in the calculation of shareholding by a bank-company in any other company, the price purchased by the respective bank shall be considered as the 'market value'."
These instructions are issued under the authority granted in Section 45 of the Banking Company Act, 1991.
These instructions shall come into force immediately, and other instructions of DOS Circular No. 02/2013 and DOS Circular Letter No. 07/2014 shall remain unchanged.
Yours faithfully,
(Md. Abdul Mannan) Director (DOS) Phone No.: 9530314 Department of Off-Site Supervision