Finance Minister AMA Muhith on Friday said the government has decided to increase the capital of the merchant banks as well as to stop their “forced sale” apparently in a bid to stabilize the volatile capital market. “The capital of the merchant banks is small… we’ve decided to increase their capital, but it is difficult to say now to what extent,” he said while briefing reporters after his meeting with the merchant bankers at the Securities and Exchange Commission (SEC) conference room.
Banking Division Secretary Shafiqur Rahman Patwari, SEC chairman Ziaul Haque Khondoker, member Yasin Ali and other high officials of the SEC and the merchant banks attended the meeting.
On margin loan, the Finance Minister said the government could only formulate a guideline or fix the limit and nothing more than that.
It was decided in the meeting that the lenders and their clients would agree on the margin loan ratio and other conditions based on their relationship, he added.
He informed that before finalizing the proposed law relating to the merchant banks, there would be discussions with the stakeholders.
About the allegation of “forced sale” against the merchant banks, Muhith said he personally thinks that such sale is immoral. He said that the merchant banks can play a balancing factor in the market.
“When you buy, you should also sale. When share prices increase, you must also sale.”
Replying to a question, the Finance Minister said that he himself and different institutions under his ministry had some “faults” in stabilizing the market.
He said that BNP leaders Barrister Moudud Ahmed and MK Anwar “did not think the way I did about the market.”
Muhith also justified their frequent interventions considering the volatility of the market.
Asked about the recent government decision asking the ICB and four state-owned banks to buy shares, he said: “This is not illegal… the purpose is to keep alive the market.”
The Finance Minister opined that the market was unimportant for the economy for some time because the required investment did not although share prices increased.
“But now I see there are opportunities as many applications have been received for IPOs (Initial Public Offerings).”
He told a questioner that the exposure of the merchant banks would increase if their capital is raised.
Besides, work is going on to reconstruct the index involving the DSE and CSE, he said.
Muhith voiced his reservations about the Chartered Accountants in carrying out company assessments and emphasized bringing them under law.
He said they have sent proposals to the cabinet twice for formulating a Financial Reporting Act to constitute a council as an overseer of the chartered accountants and look for any faults or whether any reform is needed.
Asked about the instability of the capital market, the Finance Minister said that the answer might be a political one. “It is an incestuous market and this should be stopped.”
Mentioning that the bourses have agreed for demutualization, he said that the capital market is bound to be a difficult market, if “I am the investor, I am the issuer and also I am the broker.”
SEC chairman Ziaul Haque Khondker said that the merchant banks came up with the proposals for increasing their capital, formulating clear guidelines for re-evaluation of assets and introducing advisory services.
He informed that the draft guideline on the book
building method has been prepared and it would be finalized after consulting the stakeholders.

News: The Independent/ Bangladesh/ Feb-19-2011