BB asks to calculate exposure limit at purchase price of stocks

Publish: 12:48 AM, August 5, 2022 | Update: 12:48:AM, August 5, 2022

The investment limit (exposure limit) of banks in
the capital market will now be calculated at the purchase price instead of
the market price, according to the Bangladesh Bank (BB).

The central bank issued a circular saying that the purchasing price of shares
of other companies, mutual funds, debentures and corporate bonds will be
considered during the counting of the highest exposure limit of banks.

Earlier, the finance ministry through a letter urged the Bangladesh Bank
governor to allow the cost price of share purchase as their exposure limit.

At present, banks’ exposure limit in the stock market is calculated on the
market price instead of the cost price. As a result, if the stock market
index or share price increases, the exposure limit of the bank is exceeded.

So, banks are forced to sell shares to stay within this limit. As a result,
the index fell due to selling pressure in the bullish stock market.

Banks are major institutional investors in the bourses of Dhaka and
Chattogram, their selling pressure hinders the market rallies every now and

Banks can invest in listed securities up to 25 per cent of their equity on a
solo basis and 50% on a consolidated basis, according to the Bank Companies