Bangladesh Bank (BB) has asked the chief executives of all commercial banks not to get deeply involved in non-banking activities, including investment in the stockmarket.

At a meeting with the chief executives yesterday, the central bank said punitive actions will be taken against the banks involved in irregularities in the stockmarket.

After the meeting, BB Deputy Governor Nazrul Huda told reporters that they are yet to receive the report on the recent share market probe. He, however, said the central bank will conduct a separate investigation after getting the report.

On the basis of the investigation, actions will be taken against the banks according to the gravity of the offence, if any.

"We have read stories published in newspapers and are saddened to learn about manipulation by the banks," Huda said.

He said the central bank has taken steps to amend the rules that govern the amount of money the banks can invest in the share market.

Citing a study by the central bank, Huda said that if any bank invests 10 percent of its deposits and if the share price slides by 25 percent from its purchase price, the bank's capital will be reduced by a minimum of 2 percent.

In a meeting, BB Governor Atiur Rahman said they had earlier expressed concerns over the banks' non-banking activities, especially risky investments.

The “precariously off-balance situation” has been created in the banking sector as these banks did not take the corrective measures on time. The BB governor advised the banks to conduct banking activities cautiously in future.

News: Daily Star/Bangladesh/ Apr-11-2011