The Bangladesh Bank (BB) asked the financial institutions (FIs) to go by SEC rule on margin loan ratio set by the securities regulator in operating their subsidiary companies – merchant banks and brokerage houses. The margin loan is the credit provided by the merchant banks against securities held by the investors.

The central bank recommended that all the financial institutions should follow margin loan ratio in line with the SEC guidelines in managing their subsidiary companies, said BB in its statement issued on Wednesday.

On September 30, the Securities and Exchange Commission (SEC) has set new margin loan ratio for merchant banks and brokerage firms. It decided to bring down the ratio of share credit in phases.

Under the new guideline, the existing margin loan ratio at 1:2 will remain unchanged till June 30, 2013.

The ratio will come down to 1:1.5 from July 2013 and will remain effective until December of the same year. From January 2014 the ratio will be 1:1 and from July 2014 it will be 1:0.5.

News: The Daily Independent/Bangladesh/22-Nov-12