In a major step, the Securities and Exchange Commission (SEC) yesterday decided to let lenders take decisions on share credit and perform other tasks related to margin loan disbursement and maintenance.

The merchant banks and stockbrokers, who provide margin loans for share purchase, will however have to report to the SEC on credit disbursement and maintenance on a monthly basis so that the regulator can monitor.

Previously, the SEC had fixed the loan ratio and the lenders provided credit in line with the limit, but the regulator was facing strong criticism from experts and market intermediaries for its role in share credit.

In another move, the SEC allowed stock exchanges to take decisions on some other issues such as transfer of securities from one trading market to another, and suspension of stock trading. Earlier, the bourses acted only on instructions from the SEC.

The decisions came from SEC's meeting with merchant banks and the twin bourses. The commission's Chairman Ziaul Haque Khondker presided over the meeting, attended by presidents and chief executive officers of Dhaka and Chittagong stock exchanges, president of Bangladesh Merchant Banker's Association (BMBA), and three executive directors of the SEC.

However, the SEC handed over a task to the BMBA to make a 'guideline' on margin loan and asked the association to submit it by February 10 to the commission for regulatory approval, said Saifur Rahman, an executive director of the SEC.

"While preparing the guideline, some issues will have to be considered such as valuation method of securities in a client's portfolio, highest limit or ratio of margin loan, certain procedures on margin call or forced sell and considering the existing securities rules and regulations," he said in a press briefing.

Once the margin loan ratio is fixed, the limit can be reset after six months. "The revised loan ratio will come into effect from the first trading day of every January or July," Rahman said.

He said after the new decisions takes effect, every merchant bank will have to submit reports on previous month's loan disbursement and maintenance, while the stockbrokers will have to submit similar reports through their exchanges.

On the bourses responsibilities, he said, the stock exchanges can shift trading of securities from public market to spot market by their own decision, and can also stop trading of stocks considering the price movement or the market situation.

"They only have to inform the commission after taking such a decision," the SEC executive director said, adding: "It will help the stock exchanges to play their role as statutory regulatory organisation."

News: The Daily Star/ Bangladesh/ Feb-02-2011

MA Sabur, sponsor director and former chairman of United Commercial Bank Limited (UCB) has been elected as the Chairman of Executive Committee of the Bank.

The decision on his appointment was made unanimously at the 312th meeting of the Board of Directors of the bank in the city yesterday, says a press release.

Sabur, born in January 2, 1948 is the founder managing director of Maxim Limited which includes three garment units, two towel and linen industries and two textile spinning industries.

Son of late Alhaj Rahan Ali of Kanchan of Narayangonj, Sabur is also the chairman of Masco Group and director of Janata Insurance Co Ltd.

Sabur is a reputed philanthropist and actively associated with many educational and socio-cultural organisations of Chittag- ong and Dhaka.

News: Daily Sun / Bangladesh/ Feb-02-2011

Sonali bank and Electro Mechanical Services Limited (EMSL) has signed a contract recently.

M Sahid Hossain, deputy general manager (IT Division) of Sonali Bank Limited (SBL), and Ansar Uddin, managing director of Electro Mechanical Services Limited (EMSL), exchang documents after signing a contract on behalf of their respective sides in Dhaka, said a press release.

Under the deal, EMSL will supply 243 electric generators to the state owned bank to computerise all of its branches.

ANM Masrurul Huda Siraji, general manager of SBL, and its other officials were also present.

News: Daily Sun / Bangladesh/ Feb-02-2011

The half-yearly Monetary Policy announced in Dhaka on Sunday detailed steps that the central Bangladesh Bank has taken in the field of banking sector.
The statement said, BB has initiated necessary corrective and preventive supervi sory steps against lending
discipline lapses in banks leading to loan diversion into unauthorized uses, holding bank CEOs responsible for oversight on loan utilization (November 2010). In the backdrop of skyrocketing real estate prices, banks have been asked (in April 2010) not to extend loans for land purchase.
Compliance surveillance on permitted ceiling of holding of capital market assets by banks was tightened in June 2010, with revised reporting instructions and supervisory arrangements.
In October 2010, general provisioning requirement on bank loans against stocks and shares was doubled to two per cent.
In December 2010, fifty per cent margin requirement was made mandatory on all consumer financing; and mandatory adjustment period of current overdrafts to rice traders was reduced to 30 days, to curtail tendency of speculative hoarding.
Besides the above mentioned supervisory measures to influence sectoral composition of credit, monetary policy measures adopted to influence cost and volume of credit included i) half per centage point increases in CRR and SLR for scheduled banks from mid May, and once again from mid December 2010, and ii) one per centage point increase in BB’s overnight repo and reverse repo interest rates from August 19, 2010.
Impact of these measures in the credit market remained largely imperceptible until towards the end of Q2 FY11, swamped out by seasonal large currency withdrawal spikes customary on occasion of the two Eid festivities.
The impact started showing up clearly from December in H2 FY11, coupled with pressure on market liquidity caused by heavy outflows for imports and other external payments such as income surplus/profit/ dividend repatriation by foreign ventures repatriation of post tax income surpluses of foreign airlines, shipping lines and so forth. Repo liquidity infusion in the market from BB had to be increased substantially following the CRR increase in mid- December, to ease the strong outflow related strains mentioned above.
The episode of pressure on liquidity brought to surface significant mismatches of Asset Liability Maturities in some banks, causing these to create unusually high spikes in overnight interbank interest rates.
BB has since been intrusively monitoring the ALM management practices in these banks.
BB’s mid-December infusion of repo liquidity much larger than the liquidity withdrawn by CRR increase has been questioned in some quarters as being tantamount to negation of the CRR increase, but the analogy is not correct.
CRR ties up with BB part of a scheduled bank’s own funds that it could use in credit creation, funds tied up as CRR are not remunerated.
Repo is a transient (overnight) facility at a cost to tide over liquidity difficulties arising from earlier commitments, not at all suitable for use in expanding customer lending.
A sharp price correction came about in the beginning of January 2011 in the country’s capital markets seen by analysts as overvalued from quite some months ago.
SEC and other concerned authorities moved quickly with confidence restoration measures (mainly activation of institutional investors in playing their due roles), successfully putting the market back on its feet after a day in freefall and trading stoppage.
Some quarters incorrectly attributed the sharp capital market price movements to the money market liquidity situation following the mid-December CRR increase.
Selling pressures that forced the price movements had little if anything to do with money market liquidity.
Investors offloading part of existing stockholdings to raise cash for three upcoming IPO subscriptions were apparently the proximate factors behind selling pressure that triggered the price correction; in just one of the three IPOs (of MJL), subscriptions worth Taka 26.4 billion were received against issue offer for Taka 6.1 billion.
The few banks with capital market asset holdings beyond permissible limits were allowed extended periods to scale down to permitted levels gradually, and had no reason to cause abrupt selling pressure.

News: The Independent / Bangladesh/ Feb-01-2011

Shamsuddin Ahmed, Managing Director and CEO of Uttara Bank Limited addressing the First Zonal Heads' conference 2011 in the conference parjatan Holiday Complex, Rangamati  recently, says a press release. The meeting discussed overall achievement of the Bank in 2010 and various aspects for the year 2011.
Additional Managing Director Shaikh Abdul Aziz, Deputy Managing Directors M. A. Matin and Md. Fazlur Rahman were also present at the conference.

News: The Independent / Bangladesh/ Feb-01-2011