Banks' scope to invest in the stockmarket will remain high despite a proposed amendment to the Banking Companies Act, as the banks have a strong capital base now.

The amendment will allow the banks to invest 40 percent of their capital in stocks though the present law allows them to invest 10 percent of their total liabilities in the stockmarket.

After the amendment, banks will be able to raise their stock investment up to Tk 23,000 crore from Tk 16,000 crore recorded in September.

According to Bangladesh Bank statistics, the amount of total capital in the banks was Tk 56,201 crore in June.

When the stockmarket was booming in 2010, the banks' investment in stocks was below Tk 20,000 crore.

Though as per the draft amendment, the scope for banks' investment in the stockmarket will decrease, the remaining scope is still much higher than the global standard, said a BB official.

The International Monetary Fund also suggested that banks' investment in the stockmarket should be 25 percent of their capital.

The central bank official said the banks' capital has grown much in the recent time as per the Basel-II requirements, but their capital will increase further when Basel-III will take effect soon.

According to the central bank statistics, the total capital of the banks was Tk 20,578 crore in 2008.

The banking sector has witnessed an increase of Tk 35,623 crore in their capital in the last four years.

It means the overall capital growth has been 173 percent over the last four years with an annual average growth of about 49 percent.

As per Basel-II requirements, banks need to maintain their capital at 10 percent of their risk weighted assets. But in reality, the banks have been able to maintain their capital at 11.31 percent, which is more than the required level.

The BB official said, this was mainly due to the transfer of a large portion of their profit to capital. As a result, the base of the banking system has become stronger, he added.

News: The Daily Star/Bangladesh/26-Nov-12