Nonbanks can now calculate stock exposure at cost price

Non-bank financial institutions in Bangladesh have been allowed to calculate their stock market exposure limit on the basis of the purchasing price of the securities they own instead of their market value.

Today, the central bank, in a circular, said the purchasing price of shares of other companies, mutual funds, debentures and corporate bonds would be considered in calculating the highest exposure limit of banks.

As per the Banking Companies Act 1991, a bank's investment in the capital market is limited to 25 per cent of its capital, which includes paid-up capital, share premium, statutory reserve, and retained earnings.

Last week, the central bank allowed scheduled banks to calculate the exposure limit on the bases of cost price.

Stock market intermediaries have long been requesting the Bangladesh Bank to permit banks to compute their exposure on the basis of costs.

The finance ministry also recommended the central bank bring changes to the rules.