The central bank is relaxing law for the four foreign banks to retain their Tk 90 billion investment in the capital market.
Bangladesh Bank Governor Atiur Rahman has written to Bank and Financial Institutions Division Secretary M Aslam Alam for his opinion on the move for HSBC, Citibank NA, Standard Chartered and Woori Bank.
Section 7(A) of the Banking Company Amendment Act, that took effect on July 22, provides that a bank has to open a subsidiary company to invest in the capital market on its own or for any individual or company.
The four banks have Tk 90 billion ($1.2 billion) custodian investment in Bangladesh’s two stock exchanges for their parent companies and clients.
As per the present provision of the law, they cannot maintain the investment unless they form subsidiaries.
Following the publication of the amended Act’s gazette, the foreign banks sought opinion from the central bank about what they needed to do.
Bangladesh Bank first advised them to open subsidiary companies but the banks pleaded that their parent companies were not interested.
The central then moved to relax the law to prevent them from rolling back their fund from the market.
Bangladesh Bank will decide the matter after receiving opinion from the ministry.
If the decision goes in favour of the four banks, they will get exemption from the obligation under Section 121 of the law, which provides for relaxation of conditions in some special cases.
The new law also bars banks from investing more than 25 percent of their paid-up capital, statutory reserve and retained earnings in the capital market.
The banks having investment in the capital market more than the ceiling have to bring it down within July 21, 2016.
The provision will be applicable to the four foreign banks too.
Source: Bd news24