Banks' exposure to the stockmarket came down within the safe limit at the end of the year, but their total investment still runs into more than Tk 15,000 crore.

The exposure of banks to stocks has been around 4 percent of their liabilities as of November 30, according to statistics from Bangladesh Bank. Banks are allowed to invest 10 percent of their liabilities in stocks.

A year ago, the situation was a bit different. Of 44 banks, 12 invested more than 10 percent of their liabilities in stocks. The exposure of only three banks was more than 20 percent of their liabilities, while another three banks exceeded 15 percent.

When the stockmarket was at its peak in September last year, investment by the banks was Tk 23,000 crore in terms of market value. On November 30 this year, it has come down to Tk 15,000 crore in market value.
An official of National Credit and Commercial Bank said his bank's investment decreased in the last one year, as the market price of their shares fell. He said their real investment remained the same.

Although investment in the market is a bit risky, bankers said, commercial banks are still investing in stocks.
A high official of Janata Bank said as the money in the Banks is depositors' money, they invest cautiously. They invest in companies that give profits to their share-holders and have a good price earnings ratio.

An official of Shahjalal Bank said the Bank's profit from the stockmarket will not be as much as it was last year. He said many banks will still make profits from the sluggish market. If the general investors invest cautiously, they will also be able to profit, the official said.

The Banks made a profit of Tk 2,500 crore from the stockmarket last year, according to statistics from the central bank.

Of the total investment of Tk 15,000 crore made by banks, Tk 9,039 crore was in the banks' own portfolios, Tk 4,802 crore as loans to its subsidiaries and Tk 1,193 crore was in other stockmarket loans as of November 30.

The total exposure of the four state-owned commercial banks in the share market is Tk 3,148 crore or 2.40 percent of their liabilities.

The total exposure of 24 private commercial banks is Tk 10,132 crore or 4.46 percent, while it is Tk 1,238 crore or 1.57 percent for six Islami banks.

Of the foreign banks, only one bank -- Bank Al Falah -- has exposure worth Tk 12 crore. Of the specialised banks, Bangladesh Development Bank's exposure is Tk 504 crore.

Bangladesh Bank will meet today with the chief executive officers of all banks where different risks and initiatives, including issues related to the capital market in the coming year, will be discussed.

There remains a debate over how much investment the commercial banks can make in the share market. International practice shows a commercial bank cannot investment more than 25 percent of its capital.

Most experts and economists in Bangladesh feel that banks' investment in the market must be related to its capital. If that is taken into consideration, the banks in Bangladesh have invested much more.

However, the central bank in its draft bank company act made a proposal to this effect but there is still ambivalence in the government regarding it.

The Daily Star/Bangladesh/ 26th Dec 2011