Introduction

As we all know, financial sector is the highly regulated sector and a complicate market .It is tough to have a financial market that is perfect because principles regarding short selling or regulation regarding marginal loan or circuit range for a financial asset is out of regulation often manipulated creating asymmetric information problem. Joking apart financial market is being as an instrument for financial exploitation with an tendency of tapping out small investors. Our honorary finance minister also regretted by saying that financial market nothing but indeed a weird market. So for the smooth growth of industrial sector with adequate capital it needs to be monitored and regulated responding to any mechanism that is intended to exploit investor, demolishing economy, contracting investment and resulting to financial panic.Truely speaking financial market can be termed as the market of uncertain bubble. Still bond market is not popular market in our country; government administration did not show any interest that brought out fair and just for regaining transparency in the market and confidence into investor. All through our monitoring we tried to search out regulation imposed by regulatory authority and counter mechanism that will prevent organizations and individuals from exploiting.

Monday, January 2, 2012

Banks' profits go up despite stock debacle

Rejaul Karim Byron and Md Fazlur Rahman. Private commercial banks weathered a steep downswing in the stock market last year to continue their profit growth..Many thought that the banks' operating profit would come down due to the debacle in the stock market, as the key index of the Dhaka bourse plunged by around 37 percent in the year. But the banks proved them wrong. Of the 30 private banks in Bangladesh, however, nine banks saw profits decline in the year. The profit before tax mainly came, riding on their core banking business, financing of buoyant export and import, and channeling of still stable remittances. In 2010, the banks made a profit of Tk 2,497 crore from the stock market. Out of them, the private banks made Tk 2,205 crore. Four state banks -- Janata, Rupali, Sonali and Agrani -- also logged higher profit in the just concluded year compared to the previous year. Janata Bank's profit stood at Tk 1,500 crore, while Rupali and Sonali logged Tk 325 crore and Tk 1,458 crore respectively. Agrani Bank's figures could not be known

Summary
Private commercial banks weathered a steep downswing in the stock market last year to continue their profit growth. Many thought that the banks' operating profit would come down due to the debacle in the stock market, as the key index of the Dhaka bourse plunged by around 37 percent in the year. But the banks proved them wrong. Of the 30 private banks in Bangladesh, however, nine banks saw profits decline in the year. The profit before tax mainly came, riding on their core banking business, financing of buoyant export and import, and channeling of still stable remittances.

Wednesday, January 4, 2012

SEC cuts settlement time for investors

The settlement period of trading on the twin bourses will be three days instead of four, which will quicken payment in share transactions, an official of the Securities and Exchange Commission said yesterday. The commission modified the settlement rules on December 27, he said. The Dhaka Stock Exchange will reduce its trading settlement time, in line with the latest modification of transactions rules, said Shakil Rizvi, president of DSE. From now, the bourses will follow the so-called T+2 settlement period, which means buyers will receive shares and sellers will get money two days after a trade is made. Earlier, it was T+3.

Summary
The commission modified the settlement rules that the settlement period of trading on the twin bourses will be three days instead of four, which will quicken payment in share transactions. According to the president of DSE, Dhaka Stock Exchange will reduce its trading settlement time, in line with the latest modification of transactions rules, From now, the bourses will follow the so-called T+2 settlement periods, which means buyers will receive shares and sellers will get money two days after a trade is made. Earlier, it was T+3.

January 12, 2012

DSE partners with BGCCI for technical assistance

Dhaka Stock Exchange yesterday struck a technical assistance deal with Bangladesh German Chamber of Commerce and Industry (BGCCI) that will help the bourse to graduate to an international-standard bourse.The chamber will help the bourse get consultancy for its demutualisation, provide technical assistance for trading system and IT-related matters to the DSE and assist in employment training and capacity building of the bourse management.The chamber will also work to bring German investments into securities listed on the bourse, according to the deal signed by BGCCI President Saiful Islam and DSE President Md Shakil Rizvi. After the function, Islam said although the government initiated a move to set up a 'special economic zone' last year to encourage foreign investment in the country, the zone is yet to be established.The German companies that want to invest here cannot make their investment due to the delay in setting up the economic zone. If the zone is completed within June, at least 12 German companies will invest in the country, the BGCCI chief said.Some of them may also become interested to raise capital from Bangladesh's stockmarkets, Islam added.Rizvi said the agreement allows DSE to step into an international arena from a local arena. "It's a great opportunity for us.""We will take advice on demutualisation from internationally renowned consultants through the BGCCI," the DSE president added. DSE Senior Vice-president Ahsanul Islam, Vice-president Md Shahjahan, directors Ahmad Rashid Lali and Khazwa Gulam Rasul, Chief Executive Officer Mosharaf M Hossain and Chief Financial Officer Shuvra Kanti Chowdhury and BGCCI Executive Director Daniel Seidl were also present at the ceremony at the DSE premises.

Summary
Dhaka Stock Exchange struck a technical assistance deal with Bangladesh German Chamber of Commerce and Industry (BGCCI) that will help the bourse to graduate to an internationalstandard bourse. The chamber will help the bourse get consultancy for its demutualization, provide technical assistance for trading system and IT-related matters to the DSE and assist in employment training and capacity building of the bourse management. The chamber will also work to bring German investments into securities listed on the bourse.

Wednesday, January 18, 2012

CSE to launch new index

The port city bourse will launch a free-float market cap-based index after issuing a gazette on the Securities and Exchange Commission's definition of such index, said its president Al Maruf Khan yesterday.He spoke at a press conference on CSE indices and demutua-lisation process at CSE building at Eunoos Centre in the capital.Khan said the Chittagong Stock Exchange calculates the index based on market cap and listed stocks. Now CSE plans to shift all its existing indices to free-float base index in line with the market movement, he added. The Chittagong bourse considered December 30, 1999 as a base for the CSE's index -- CASPI -- and January 1, 2000 for other indices. CSE includes new initial public offerings to its indices from the second day of its trading.The CSE president said the bourse now follows an international standard system for index calculation, and the system is updated as per requirement to implement free-float based index. The index value will remain the same on the day when it will be shifted to free float methodology from the traditional one, according to a statement of the CSE.However, the securities regulator on Sunday adopted an international definition of the free-float methodology in market capitalisation to introduce a new stock index for a more accurate reflection of market movements. Under the free-float system, market capitalisation is calculated by taking the equity's price and multiplying it by the number of shares readily available for trading on a particular day in the market.Fakhor Uddin Ali Ahmed, former president of CSE, said the South Asian Federation of Exchanges will help to complete the demutualisation process. He said demutualisation of CSE will help give the best prices to the investors.With the process of demutualisation, CSE will run for profit organisation and the chief executive officer will be mostly responsible for profit maximisation through effective business development and expansio

Summary
The port city bourse will launch a free-float market cap-based index after issuing a gazette on the Securities and Exchange Commission's definition of such index. The CSE president said, Chittagong Stock Exchange calculates the index based on market cap and listed stocks. Now CSE plans to shift all its existing indices to free-float base index in line with the market movement. CSE president said the bourse now follows an international standard system for index calculation, and the system is updated as per requirement to implement free-float based index. Under the free-float system, market capitalization is calculated by taking the equity's price and multiplying it by the number of shares readily available for trading on a particular day in the market.
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Thursday, January 26, 2012

BB to tighten monetary policy

Bangladesh Bank will announce its monetary policy today for the second half of the current fiscal year with a further tightening approach.A high official of the central bank said the main target of the policy will be to achieve the targeted GDP (gross domestic product) growth and contain high inflation.This time, the monetary policy will also reflect the recommendations of the International Monetary Fund (IMF) as Bangladesh is going to enter the credit programme of the donor agency after about a decade.However, another BB official said the policy the central bank took at the beginning of the fiscal year will continue. Non-food inflation crossed double digits in the recent years and outpaced food inflation for the first time in December. The BB officials said one of the main targets of the central bank will be to contain non-food inflation.Point-to-point inflation has been rising at a double-digit rate for a consecutive nine months since March last year. Such a rare incident was last seen at the beginning of 1980s when inflation grew at a double-digit rate for a long time.The central bank may also set a target to bring down domestic credit growth below 19 percent by June this year to rein in inflation. In the first monetary policy of the current fiscal year announced in July the target was 20 percent.The central bank officials said, to meet the target both public sector and private sector credit growth has to be brought down. However, cutting down public sector credit growth will be a big challenge, they said.

The target for private sector credit growth may be set at 13-15 percent by June next which was 18 percent in the first monetary policy.The rate of private sector credit growth already came down to 19.33 percent in November 2011 from around 28 percent last fiscal year. The BB has already taken several steps to contain credit growth. The moves include increasing repo rate and lifting the lending cap. The repo rate may be raised further by June. To cut loan growth in the unproductive sector, consumers' and housing credit's equity portion of the total amount has been hiked by the central bank recently.Another target of the monetary policy is to ease pressure on the foreign currency reserve and exchange rate by cutting down import growth.On January 18 foreign currency reserve was $9.04 billion, down from $10.91 billion on June 30 last year. The amount of the country's present reserve is equal to 2.87 months' import bill. But according to international standard, keeping the foreign currency reserve equal to a country's three months' import bill is considered as a safe limit.An IMF report last month said a comprehensive package of macro-policy tightening measures and financial sector restraints is needed to stabilise the economy and avert a near-term balance of payments crisis.The rapid loss of the central bank reserves over the past few months is expected to continue beyond fiscal 2012 and makes clear that the current policies are unsustainable, with a coordinated policy response essential to restoring macro-economic stability, the report said.

Summary
Bangladesh Bank is going to announce its monetary policy for the second half of the current fiscal year with a further tightening approach. This time, the monetary policy will also reflect the recommendations of the International Monetary Fund (IMF) as Bangladesh is going to enter the credit programme of the donor agency after about a decade. Inflation has been rising at a doubledigit rate for a consecutive nine months since March last year. Such a rare incident was last seen at the beginning of 1980s when inflation grew at a double-digit rate for a long time. The central bank also wants to set a target to bring down domestic credit growth below 19 percent by June 2012 to rein in inflation. In the first monetary policy of the current fiscal year announced in July the target was 20 percent.. According to the experts, to meet the target both public sector and private sector credit growth has to be brought down.

Wednesday, February01, 2012 2012 BB clarifies non-banks' exposure to stocks

The central bank yesterday issued a circular to clarify that non-bank financial institutions' investment in their subsidiary would not be considered while measuring their exposure to the capital market. In line with the circular, long-term capital investment of non-bank financial institutions in other companies will not be considered as its exposure limits to the stockmarket.On November 23, the Securities and Exchange Commission declared short-, mid- and long-term steps to stabilise the market.The SEC said: The loans provided by banks and financial institutions to their capital market subsidiaries and long term equity investment will not be taken into account while estimating their 'exposure to stock market'. The Bangladesh Bank has extended the deadline for financial institutions to adjust their single-party exposure relating to the stockmarket by one year to December 31 of 2013, according to the circular.Single party exposure limit is 15 percent. It means if a financial institutions' paid-up capital is Tk 200 crore, it cannot lend more than Tk 30 crore to its subsidiary.Besides, in case of provisioning stockmarket investment by financial institutions, gains and losses would be considered instead of net loss only.The copies of the central bank circular have been sent to chiefs of all financial institutions

Summary:
The central bank issued a circular to clarify that non-bank financial institutions' capital market investment in their subsidiary would not be considered while measuring their exposure to the capital market.In line with the circular, long-term capital investment of non-bank financial institutions in other companies will not be considered as its exposure limits to the stockmarket.Single party exposure limit is 15 percent. It means if a financial institutions' paid-up capital is Tk 200 crore, it cannot lend more than Tk 30 crore to its subsidiary.

Wednesday, February08, 2012 2012 Banks self-impose cap on interest rates

Private commercial banks yesterday self-imposed a cap on their lending and deposit rates to check unhealthy competition in the market.At a meeting, the Association of Bankers Bangladesh (ABB) decided to offer an interest rate of 12.5 percent on deposits and charge 15.5 percent for industrial term loans and working capital.However, loans for consumers, home loans and credit cards will be out of the purview.Mohammed Nurul Amin, chairman of ABB, presided over the meeting at its office in Dhaka.Amin said at present, there is no cap on the lending and deposit rates. "Under the circumstance, we should not behave in a way that creates indiscipline." "There should not be any sudden jump in the lending or deposit rates. We have taken the initiative to keep the hike at a rational level," he told The Daily Star.Amin, also the managing director of NCC Bank, said Bangladesh Bank also wants to keep the interest rate spread below 5 percent."In line with the spirit of the central bank, we also want unhealthy competition in the banking sector to end."He said the association of bankers, however, did not impose any written cap. "We have urged the bankers to comply with the decision, which will ensure discipline and benefit the business community."ABB has taken the decision due to "moral suasion" by the central bank, said a member of the association. This came a day after top officials of the central bank sat with leaders of ABB and urged them to keep the spread at below 5 percent.BB also observed that the lending rate would never exceed 15 percent when the spread is below 5 percent. On January 4, the central bank withdrew the 13 percent interest rate limit on bank loans, prompting the private banks to increase their lending rates.According to BB data, 18 out of 30 private banks charged 16 percent to 18 percent for industrial loans and working capital in January.The hike in interest rate invoked sharp criticism from the business community including the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country's apex trade body. In addition, the term deposit rates last month ranged between 11 and 12 percent. However, eight banks offered deposit rates between 13 and 14.5 percent, showed data.Many bankers said the deposit rates could have gone up further in the coming months due to ongoing unhealthy competition among the banks on deposit rates.As a result, the lending rate would have gone up further, they said.

"We have self-imposed the cap on productive loans and loans for essential commodities," a member of ABB said.A senior BB official said until 2007-08, there had been no cap on deposit rates or loans since the country introduced a liberalised policy in the banking system in 1992.The immediate past caretaker government imposed a cap on lending rates due to the global economic crisis.While announcing the monetary policy statement in July last year, the central bank said it would withdraw the cap on lending.When the central bank withdrew the cap in January, it said it would monitor the situation so that rates do not go up abnormally.

Summary:
Private commercial banks had self-imposed a cap on their lending and deposit rates to check unhealthy competition in the market.At a meeting, the Association of Bankers Bangladesh (ABB) decided to offer an interest rate of 12.5 percent on deposits and charge 15.5 percent for industrial term loans and working capital.However, loans for consumers, home loans and credit cards will be out of the purview.BB also observed that the lending rate would never exceed 15 percent when the spread is below 5 percent.On January 4, the central bank withdrew the 13 percent interest rate limit on bank loans, prompting the private banks to increase their lending rates.According to BB data, 18 out of 30 private banks charged 16 percent to 18 percent for industrial loans and working capital in January.

Monday, February13, 2012 2012 SEC looking into 'unusual' trade of stockbroker
The Securities and Exchange Commission yesterday opened a probe into unusual trading in shares by Royal Capital Ltd, a stockbroker.The stockmarket regulator set up a two-member panel to investigate the unusual trading by Royal Capital during yesterday's stock transaction, according to a posting on the Dhaka Stock Exchange website.The market watchdog also asked the committee, comprising SEC Deputy Director Md Hossain Khan and Assistant Director Saiful Islam, to submit a report to the commission in next three workdays. On February 8, the SEC launched a probe into unusual share trading by LankaBangla Securities after the regulator got information on suspicious trading by the stockbroker.SEC Director Mahbubur Rahman and Deputy Director Ohidul Islam, who investigated the LankaBangla issue, are expected to submit a report to the commission today.

Summary :
The Securities and Exchange Commission has opened a probe into unusual trading in shares by Royal Capital Ltd ,a stockbroker.The stockmarket regulator set up a two-member panel to investigate the 10

unusual trading by Royal Capital during yesterday's stock transaction, according to a posting on the Dhaka Stock Exchange website.On February 8, the SEC launched a probe into unusual share trading by LankaBangla Securities after the regulator got information on suspicious trading by the stockbroker.

Tuesday, February14, 2012 2012

SEC to re-audit accounts of listed companies

The stock market regulator will re-audit the financial reports of listed companies, as suspicion has surfaced over dividends declared by some firms.The regulator will examine whether the companies are intentionally inflating or deflating any figure in their accounts, said a top official of the Securities and Exchange Commission. The commission took the decision to re-audit last week.Dutch-Bangla Bank Ltd (DBBL), for example, announced lower-than-expected dividends for 2011, the SEC official said, asking not to be named.DBBL announced 40 percent cash dividends for the general public and foreign shareholders on February 7. The bank also declared that local sponsors will not receive any dividend. The bank announced earnings per share (EPS) of Tk 10.77, net asset value (NAV) per share of Tk 44.70 and net operating cash flow per share of Tk 43.32 for the year ended December 31, 2011.The following day, each DBBL share declined by almost 15 percent as the recommended dividend failed to meet investors' expectation.National Bank Ltd (NBL) declared 65 percent stock dividend on February 8. The bank also announced EPS of Tk 7.07, NAV per share of Tk 25.02 and net operating cash flow per share of Tk 8.88 for the year to December 31, 2011.NBL share prices fell on February 9.The commission will re-audit the financial reports on a random basis at its own cost, the SEC official added.

Summary :
The stockmarket regulator will re-audit the financial reports of listed companies, as suspicion has surfaced over dividends declared by some firms.Dutch-Bangla Bank Ltd (DBBL), for example, announced lower-than-expected dividends for 2011, the SEC official said, asking not to be named.DBBL announced 40 percent cash dividends for the general public and foreign shareholders on February 7. The bank also declared that local sponsors will not receive any dividend.The bank announced earnings per share (EPS) of Tk 10.77, net asset value (NAV) per share of Tk 44.70 and net operating cash flow per share of Tk 43.32 for the year ended December 31, 2011.

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Wednesday, February 16,2012

BB's commemorative note on Language Movement

Bangladesh Bank yesterday released a commemorative note of Tk 60 denomination, marking the 60th anniversary of the country's Language Movement, the BB said in a statement yesterday.Artist Murtaza Bashir unveiled the note at a function at the bank's premises in the capital.The central bank printed 10 lakh pieces of the commemorative note with the title of '60 Years of Language Movement 1952-2012'.The note carries the image of the Central Shaheed Minar on one side and portraits of five language martyrs on the other side, according to the statement.The Language Movement was not only a movement for the mother language, but it was also a fight to bring about socioeconomic changes in the country. So, we should keep it in mind round the year, said Bashir."Currency collectors, both at home and abroad, will be able to know about the Language Movement through the note," said BB Governor Atiur Rahman.Syed Badrul Ahsan, executive editor of The Daily Star, wrote the literature part of the note in English while officials of BB's department of currency management and payment systems translated it into Bangla.The note is now available at the central bank's Motijheel office at Tk 200 with an especially designed folder and envelope while only the note will cost Tk 60.The note will also be available at all branches of the BB and commercial banks across the country from February 19.

Summary:
Bangladesh Bank yesterday released a commemorative note of Tk 60 denomination, marking the 60th anniversary of the country's Language Movement, the BB said in a statement yesterday. Artist Murtaza Bashir unveiled the note at a function at the bank's premises in the capital.The central bank printed 10 lakh pieces of the commemorative note with the title of '60 Years of Language Movement 1952-2012'. The note is now available at the central bank's Motijheel office at Tk 200 with an especially designed folder and envelope while only the note will cost Tk 60.The note will also be available at all branches of the BB and commercial banks across the country from February 1

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Thursday, February 16, 2012

Bengal Investments gets nod for merchant banking

The Securities and Exchange Commission yesterday gave the green light to Bengal Investments Ltd to operate merchant banking in the capital market. The commission sent a letter to the managing director of Bengal informing that the company can run merchant banking operation since the issuance of the letter. The regulator gave the approval to the firm, according to the regulations of Merchant Banker and Portfolio Rules of 1996, as the SEC sought to increase the number of institutional investors in the market, said an SEC official. He said the SEC officials visited the office of Bengal to check its capability of running merchant banking operations.A total of 49 companies now operate merchant banking business in Bangladesh, including Bengal.The merchant banks operate loan activities, manage new issues and underwriting.Twenty more companies have applied to the SEC, seeking approval for merchant banking, the SEC official added.

Summary
The Securities and Exchange Commission on 18th February gave the green light to Bengal Investments Ltd to operate merchant bankiang in the capital market.The commission sent a letter to the managing director of Bengal informing that the company can run merchant banking operation since the issuance of the letter.The regulator gave the approval to the firm, according to the regulations of Merchant Banker and Portfolio Rules of 1996, as the SEC sought to increase the number of institutional investors in the market, said an SEC official. SEC officials visited the office of Bengal to check its capability of running merchant banking operations.A total of 49 companies now operate merchant banking business in Bangladesh, including Bengal.The merchant banks operate loan activities, manage new issues and underwriting.Twenty more companies have applied to the SEC, seeking approval for merchant banking, the SEC official added.

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Wednesday, February 22, 2012

Banks cut deposit rate but charge high interest on loans

Commercial banks have brought down the interest rate on deposits quickly after a self-imposed cap earlier this month, but the lending rate is still above the ceiling.The Association of Bankers Bangladesh (ABB) decided to offer an interest rate of 12.5 percent on deposits and charge 15.5 percent for industrial term loans and working capital to check unhealthy competition in the market.However, loans for consumers, home loans and credit cards will be out of the purview.On Monday, Bangladesh Bank (BB) released the bank deposit and lending rates for the month of February.Except for one foreign bank, the highest interest on deposit of all other banks is 12.5 percent, according to central bank statistics.In January, the interest rate on the deposits of many banks was as high as 14.5 percent. In case of the lending rate among 30 private banks, the term loans of 16 banks were above 15.5 percent. The lending rate of many banks is between 17.5 and 18 percent.The banks that still have interest rates higher than the cap on term loans and working capital are IFIC Bank, City Bank, United Commercial Bank, ICB Islamic Bank, South East Bank, Dhaka Bank, Mercantile Bank, One Bank, Exim Bank, Standard Bank, Mutual Trust Bank, Bangladesh Commerce Bank, Jamuna Bank and BRAC Bank. An official of a private bank said the cost of funds of many of the banks is much higher and they will gradually bring down the lending rate within a limit.On January 4, the central bank withdrew the 13 percent interest rate limit on bank loans, prompting the private banks to increase their lending rates.After the limit was withdrawn, many banks increased the interest on industrial loans and working capital.The hike in interest rate invoked sharp criticism from the business community, including the Federation of Bangladesh Chambers of Commerce and Industry, the country's apex trade body.Following 'moral suasion' by the central bank, ABB itself imposed a cap so that no bank can abnormally raise the deposit and lending rates.Until fiscal 2007-08, there had been no cap on the deposit or lending rates as the country introduced a liberalised policy in the banking system in 1992, a senior BB official said.The immediate past caretaker government imposed a cap on the lending rates due to the global economic crisis.

Summary:
Commercial banks have brought down the interest rate on deposits quickly after a self-imposed cap earlier this month, but the lending rate is still above the ceiling .The Association of Bankers Bangladesh (ABB) decided to offer an interest rate of 12.5 percent on deposits and charge 15.5 percent for industrial term loans and working capital to check unhealthy competition in the market. However, loans for consumers, home loans and credit cards will be out of the purview. Except for one foreign bank, the highest interest on deposit of all other banks is 12.5 percent, according to central bank statistics.In January, the interest rate on the deposits of many banks was as high as 14.5 percent. In case of the lending rate among 30 private banks, the term loans of 16 banks were above 15.5 percent. The lending rate of many banks is between 17.5 and 18 percent. On January 4, the central bank withdrew the 13 percent interest rate limit on bank loans,
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prompting the private banks to increase their lending rates. After the limit was withdrawn, many banks increased the interest on industrial loans and working capital. Following 'moral suasion' by the central bank, ABB itself imposed a cap so that no bank can abnormally raise the deposit and lending rates.

Friday, February 24, 2012 SEC again lifts investment cap on mutual funds
The Securities and Exchange Commission has again allowed mutual funds to invest in listed securities freely for another four months to June.The stockmarket regulator had suspended a couple of clauses in the Mutual Fund RulesEarlier, a mutual fund was allowed to invest 10 percent of its capital in a single security and 25 percent in one sector.The commission has lifted the investment ceiling for mutual funds considering the interest of the investors and the market, the SEC said. On September 15 last year the watchdog though a directive allowed the mutual funds to invest in listed securities without any limit up to December last year in a move to increase the flow of funds to the cash-strapped stockmarket.As the opportunity ended in December last year, asset managers urged the regulator to relax the ceiling of investment to increase the credit flow to the market.The commission considered their [asset managers'] appeal and decided to let mutual funds invest in securities freely, said a commissioner of the SEC.Presently, there are 38 mutual funds listed with the stockmarket with their combined cap

Summary
The Securities and Exchange Commission has again allowed mutual funds to invest in listed securities freely for another four months to June. The stockmarket regulator had suspended a couple of clauses in the Mutual Fund Rules of 2001, which put limits on investment by mutual funds, up to June 30.Earlier, a mutual fund was allowed to invest 10 percent of its capital in a single security and 25 percent in one sector.The commission has lifted the investment ceiling for mutual funds considering the interest of the investors and the marke .Presently, there are 38 mutual funds listed with the stockmarket with their combined capital of around Tk 3,500 crore.

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Tuesday, February 28, 2012

Two firms get nod for merchant banking 20 more companies seek approval from SEC
The Securities and Exchange Commission yesterday gave the green light to BD Finance Capital Holdings Ltd and Citizen Securities Investment Ltd to operate merchant banking in the capital market.The commission sent a letter to the managing directors of the companies with approval for merchant banking.The approval came as the SEC sought to increase the number of institutional investors in the market, an SEC official said.Twenty more companies have applied to the SEC, seeking approval for merchant banking, the official added.The regulator approved the merchant banking activities of Bengal Investments Ltd on February 15.Presently, 51 merchant banks operate in the stockmarket.Among the banks, 43 are full-fledged merchant banks, which simultaneously perform the functions of an issue manager, a portfolio manager and an underwriter.The remaining eight merchant banks carry out the functions of either an issue manager or a portfolio manager or both. Wednesday, February 29, 2012

Summary:
The Securities and Exchange Commission yesterday gave the green light to BD Finance Capital Holdings Ltd and Citizen Securities Investment Ltd to operate merchant banking in the capital market.The commission sent a letter to the managing directors of the companies with approval for merchant banking.The approval came as the SEC sought to increase the number of institutional investors in the market, an SEC official said.Twenty more companies have applied to the SEC, seeking approval for merchant banking, the official added.The regulator approved the merchant banking activities of Bengal Investments Ltd on February 15.Presently, 51 merchant banks operate in the stockmarket.Among the banks, 43 are full-fledged merchant banks, which simultaneously perform the functions of an issue manager, a portfolio manager and an underwriter.The remaining eight merchant banks carry out the functions of either an issue manager or a portfolio manager or both.

NBR sets up integrity unit

The National Board of Revenue (NBR) has set up an integrity unit in an effort to make its staff accountable to taxpayers and make the organisation graft-free.In a letter to its senior officials, the NBR said the main job of the unit will be to ensure honesty, transparency and accountability.Md Shahjahan, a NBR member, will lead the seven-member unit.Taxpayers are allegedly discouraged to pay tax due to the corrupt practices of NBR officials.If any taxpayer lodges a complaint with the unit, it will investigate the allegations and recommend necessary measures to the higher authorities, an NBR official said. Summary: The National Board of Revenue (NBR) has set up an integrity unit in an effort to make its staff accountable to taxpayers and make the organisation graft-free. The main job of the unit will be to ensure honesty, transparency and accountability.
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Thursday, March 1,2012 2012

SEC will stick to decision taken earlier about eligibility criterion

The securities regulator will hold on to its earlier decision about the requirement for sponsordirectors of publicly listed companies to hold up to a minimum of two per cent share in the paidup capital of their respective enterprises, an official of the Securities and Exchange Commission (SEC) said. In response to a FE's query whether the regulator would reconsider the matter about the minimum level of share-holding by the sponsor-directors of the listed companies having large paid-up capital, the SEC official Thursday ruled out any such possibility. Meanwhile, some sponsor-directors of the listed companies, especially those in the banking sector, said they would have to count a huge amount of money beyond their means to by the minimum level of shares, as the existing paid-up capital of the companies is several times higher than what it was at the time of launching their respective business. On November 22, 2011, the SEC imposed the mandatory provision relating to the sponsordirectors, other than independent ones, for holding individually up to, at least two per cent of their companies' paid-up capital. Otherwise, there would be a 'casual vacancy' of directors and any individual holding five per cent or more of share-holding would then be entitled to become a director of the companies concerned in their respective next annual general meeting (AGM). Besides, all sponsors or promoters and directors of a listed company will have to jointly hold a minimum level of share-holding at 30 per cent holding of their respective companies' paid-up capital. The sponsor-directors have been given six months' period for meeting the condition about their holding of shares at the required minimum level within six months from the date of issue of the gazette notification about this new the provision, set by the regulator. The SEC's directive further said, in case of non-holding of the required proportion of shares by the sponsors, promoters and directors, they would not be able to sell or transfer any shares until the acquisition of the required level of share-holding. "The mandatory provision about holding of shares up to the required minimum level, by the sponsor-directors, will be applicable to all. And the sponsor-directors of the banks will also have to comply with the provision set by the SEC if they intend to hold on to their directorship," the SEC official told the FE. The leaders of the country's two stock exchanges have expressed similar views, supporting the SEC's stand on compliance, on the part of sponsor-directors of all the listed companies, irrespective of their size in terms of paid-up capital, with the provision about their individual share-holding, up to a minimum of two per cent of the paid-up capital. "It's true that the sponsor-directors of the banks will have to buy a large number of shares in view of their large paid-up capital. On the other hand, such directors might have earlier have sold out a large number of shares, which they had got as bonus issues, at high prices. Why have they not thought about holding on their shares?", a member of the DSE board of the directors observed, on condition of anonymity.
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"The provision does not compel any sponsor to buy shares up to two per cent of the paid-up capital of any company if he or she does not intend to hold the position as one of its directors," he pointed out When asked whether there was any fear about donning the position of a director through purchase of shares by any individual with 'undisclosed money' that might raise ethical issues about running the affairs of corporate bodies, particularly the sensitive ones like those of banks, he said the issue relates to the failure of the higher authorities in curbing such unfair means of making money. "All undisclosed money is not necessarily linked with foul-game or corruption," another DSE member commented, on condition of anonymity. The board members of the Chittagong Stock Exchange (CSE) have echoed the similar views about the mandatory provision meant for the sponsor-directors to hold the minimum level of holding of their share in the paid-up capital of their respective companies. "The sponsor-directors sold out a huge number of shares to cash in on hefty amounts of profits by selling them at very high prices during the bull-run in the market. They have a moral responsibility now to buy the required number of shares at very low prices in the present bearish market," a director of the CSE told the FE. A sponsor-director of a listed company, having large paid-up capital, said that as per the directive by the central bank in fiscal year (FY) 2005-06, there is no difference between the sponsor-shareholders and the ordinary shareholders, after the company demated its shares. He also urged the regulator to re-consider the issue of holding up to two per cent of the paid-up capital of companies by their sponsor-directors -- particularly those listed ones which have a large paid-up capital base. According to the DSE data, a total of 1491 sponsor-directors hold less than two per cent shares in the paid-up capital of their listed companies. A total of fifty companies, including banks, are yet to inform the DSE about the number of the directors who own less than two per cent share in their paid-up capital. "After the final scrutiny, it will be possible to know the exact picture about the number of sponsor-directors who own less than two per cent share in the paid-up capital of their respective listed companies," a DSE official said.

Summary: The securities regulator will hold on to its earlier decision about the requirement for sponsordirectors of publicly listed companies to hold up to a minimum of two per cent share in the paidup capital of their respective enterprises, an official of the Securities and Exchange Commission (SEC) said.Otherwise, there would be a 'casual vacancy' of directors and any individual holding five per cent or more of share-holding would then be entitled to become a director of the companies concerned in their respective next annual general meeting (AGM). Besides, all sponsors or promoters and directors of a listed company will have to jointly hold a minimum level of share-holding at 30 per cent holding of their respective companies' paid-up capital. According to the DSE data, a total of 1491 sponsor-directors hold less than two per cent shares in
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the paid-up capital of their listed companies. A total of fifty companies, including banks, are yet to inform the DSE about the number of the directors who own less than two per cent share in their paid-up capital.

Monday March 12,2012. 2012 10pc tax rebate for stock investors reintroduced.
The National Board of Revenue (NBR) has reintroduced the tax rebate facility at the rate of 10 per cent on investment in listed issues with the stock exchanges for investors in the secondary market. From the current month, investors in both initial public offerings (IPOs) and in shares, mutual funds and debentures in the secondary market can enjoy this tax rebate as investment allowance.Under one of three separate Statutory Regulatory Orders (SROs) issued by NBR on Sunday, this investment allowance has been allowed.The NBR scrapped the facility for secondary market investors in the original budget for current fiscal. It has now re-introduced the tax rebate, following demands made by the investors. "Any sum invested by an assessee, being an individual, in the acquisition of any stocks or shares of a company, mutual fund or debenture listed with any stock exchange," the SRO said.

The NBR also issued a SRO offering tax exemption for foreign investors from capital gains.Public limited companies, owned by foreign or non-resident Bangladeshis, can enjoy tax exemption facility on capital gains made through investments in the listed stocks. The NBR imposed 10 per cent capital gains tax on foreign investors in the original budget for fiscal year (FY) 2011-12 which has been withdrawn through Sunday's SRO. Foreign investors can enjoy the tax exemption facility if they enjoy a similar one in their respective country of origin. "Any profit and gains under the head 'capital gains' arising from the transfer of stocks or shares of a company as defined in company law, 1994 listed in any stock exchange in Bangladesh of an asssessee being a non-resident, subject to the condition that such assessee is entitled to similar exemption in the country in which he is a resident," the SRO said. The NBR also issued a separate SRO on alternative dispute resolution (ADR) rules. The law on ADR law was enacted during the time of the approval of the Finance Bill and the Appropriations Bill, i.e., the passage of the national budget, for the current fiscal.Under the ADR rules, the NBR set 30 days time, on receipt of demand notice from the taxmen, by the taxpayers
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to submit application for resolving disputes through ADR process.Taxpayers will have to pay Tk 500 with the application for a tax year.There will be facilitators to help both taxmen and taxpayers on ADR process.Facilitators will get remuneration, which will be 10 per cent of the disputed tax amount but not below Tk 5000 and not above Tk 50,000.Both taxpayers and government or government-appointed organisation will equally share the amount to be paid as remuneration. Summary: The National Board of Revenue (NBR) has reintroduced the tax rebate facility at the rate of 10 per cent on investment in listed issues with the stock exchanges for investors in the secondary market. From the current month, investors in both initial public offerings (IPOs) and in shares, mutual funds and debentures in the secondary market can enjoy this tax rebate as investment allowance. Under one of three separate Statutory Regulatory Orders (SROs) issued by NBR on Sunday, this investment allowance has been allowed.The NBR scrapped the facility for secondary market investors in the original budget for current fiscal. It has now re-introduced the tax rebate, following demands made by the investors. Taxpayers will have to pay Tk 500 with the application for a tax year.There will be facilitators to help both taxmen and taxpayers on ADR process.Facilitators will get remuneration, which will be 10 per cent of the disputed tax amount but not below Tk 5000 and not above Tk 50,000.Both taxpayers and government or government-appointed organisation will equally share the amount to be paid as remuneration.

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Wednesday, March 14,2012. 2012 Move to bring cooperatives, banks' subsidiaries under BB watch.
A move is underway to bring operations of subsidiaries of banks and illegal banking activities in the name of cooperative societies under the strict surveillance of the Bangladesh Bank (BB) to ensure discipline in the financial sector, a top central bank official said.The measures have been incorporated in the proposed amendment to Bank Company Act (BCA), 1991. The BB has recently prepared the draft amendment of BCA, 1991 in line with the suggestions of International Monetary Fund (IMF) and the World Bank (WB).The Ministry of Finance (MoF) is now busy scrutinizing the amendment proposals of the BB made on BCA, 1991, sources said.Presently, the scheduled banks and financial institutions have around 40 subsidiaries, which act as merchant banks or securities firms. The subsidiaries are now regulated by Securities and Exchange Commission (SEC).However, the SEC is not authorized to monitor whether the subsidiaries invest excess fund of their parent organisations into share business or they make any illegal or unauthorised investment in the capital market, a BB official said. The securities regulator only monitors the sale, buy and loan portfolios of dealers and clients as the subsidiaries are liable to provide the SEC with these information on regular basis."We want subsidiaries of banks are brought under the BCA, 1991 so that the central bank can lawfully oversee their entire activities of merchant banks and brokerage houses in stock business and lending to share investors," an Executive Director of BB told the FE on Monday."The clause 44 and 45 of BCA, 1991 have to be made applicable to all subsidiaries of banks and financial institutions for the sake of clarity," he added.The BB will be empowered to take any legal action against errant subsidiaries if they are brought under BCA, 1991 and clauses 44 and 45 of the act are made applicable to merchant banks and brokerage houses.The BB could even liquidate any merchant bank or brokerage house if they are found involved in any illegal financial transaction, stipulates clause 44 of BCA, 1991."Our objective is to enforce strict monitoring of BB on merchant banks and brokerage houses to protect the interest of share investors and establish good governance in the financial sector," another BB official said. The proposed amendment to BCA, 1991 has suggested to bring illegal banking activities of cooperatives under watch as many cooperatives operating in the country use the word 'bank' after their names to attract general people to have confidence in them, it is alleged.Besides, the cooperatives which collect deposits from persons other than their members will also come under the purview of clauses 44 and 45 of BCA, 1991, says one proposed amendment to the act.The proposed clauses have given the BB adequate authority to make inspection of any bank, give it instruction or close it down, if needed.Officials in the MoF said they have formed a highpowered committee to scrutinize the amendment proposal of BCA, 1991. After the examination is completed, the amendment would be placed in the cabinet and before the parliament
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respectively for approval."The amendment to the act is inevitable as the IMF has asked to amend the BCA, 1991 to become eligible for proposed $1.0 billion loan under its Extended Credit Facility (ECF) package," a top finance official told the FE.

Summary: A move is underway to bring operations of subsidiaries of banks and illegal banking activities in the name of cooperative societies under the strict surveillance of the Bangladesh Bank (BB) to ensure discipline in the financial sector, a top central bank official said.The measures have been incorporated in the proposed amendment to Bank Company Act (BCA), 1991. The BB has recently prepared the draft amendment of BCA, 1991 in line with the suggestions of International Monetary Fund (IMF) and the World Bank (WB). Presently, the scheduled banks and financial institutions have around 40 subsidiaries, which act as merchant banks or securities firms. The subsidiaries are now regulated by Securities and Exchange Commission (SEC).However, the SEC is not authorized to monitor whether the subsidiaries invest excess fund of their parent organisations into share business or they make any illegal or unauthorised investment in the capital market, a BB official said.

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Sunday, 18th March 2012 2012 Insurance regulator to lift curbs on discounts
The insurance regulator plans to revive commission for general insurance business against premiums, more than two weeks after a halt in the traditional system.We will set a commission rate soon to remove confusion, Shefaque Ahmed, chairman of Insurance Development and Regulatory Authority (IDRA), told The Daily Star. The IDRA issued a notice in January, restricting the acceptance of premium by general insurers after adjusting it with commission. The restriction has been effective from March 1.Protesting the notice, the Bangladesh Insurance Association (BIA), a forum of owners, has since stopped paying any commission. We will not pay any commission unless the authority (IDRA) sets a rate, said Sheikh Kabir Hossain, chairman of Sonar Bangla Insurance and BIA.The move of the BIA perplexed businessmen who used to get commission from the insurers for years. Insurance (marine) is a must for export and import done by opening letters of credit (LC). According to law, an importer or exporter has to pay Tk 0.50 in premium for every Tk 1,000 worth of export or import. Bangladesh's imports and exports were more than $40 billion and around $23 billion respectively in fiscal 2010-11. Accordingly, 43 general insurance companies are in a fierce competition to have a slice of Bangladesh's booming external trade. Insurers offer hefty commission -- up to 80 percent -- to their clients to get business. If a client gets 70 percent commission against a policy premium of Tk 100,000, the client would pay only Tk 30,000 to the insurer. The rest Tk 70,000 is pocketed by the client.Clients are not entitled to any commission. They used to get it illegally for years, said Ahmed of the IDRA. The regulator has taken the move to take the general insurance business out of commission which is eroding the business potential of the industry, officials said, adding that it would also discipline the insurance business.Forty-three general insurance companies operate in the country. The combined premium income of these companies was Tk 1,803 crore in 2011, up Tk 315 crore from that in 2010.

Summary: The insurance regulator plans to revive commission for general insurance business against premiums, more than two weeks after a halt in the traditional system. The IDRA issued a notice in January, restricting the acceptance of premium by general insurers after adjusting it with commission. The restriction has been effective from March 1.Protesting the notice, the Bangladesh Insurance Association (BIA), a forum of owners, has since stopped paying any commission. The move of the BIA perplexed businessmen who used to get commission from the insurers for years. The regulator has taken the move to take the general insurance business out of commission which is eroding the business potential of the industry, officials said, adding that it would also discipline the insurance business.

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Tuesday, 20th March 2012 2012 Regulator moves to probe NBL Securities
The Securities and Exchange Commission formed a panel to probe charges against a brokerage house of providing more loans than permitted to a client to buy shares, SEC officials said yesterday.NBL Securities approved the loans for Roksana Akter, wife of Anwarul Kabir Bhuiyan, an SEC executive director who faces suspension on charges of his involvement in last year's share scam.The stockmarket regulator formed the probe committee against NBL Securities on Sunday, the SEC officials said.The regulator asked the two-member committee, led by SEC Director Mahbub-ur-Rahman, to submit a report to the commission in 15 workdays. Obidul Islam, deputy director of the SEC, is the other member of the committee. The committee found that the brokerage house gave Tk 3.2 crore as loan to the BO (beneficiary owner) account of Roksana, against a deposit of Tk 3 lakh.When the loan was sanctioned, the margin ratio was within 1:2, which means a client can borrow a maximum of Tk 6 lakh against a deposit of Tk 3 lakh.The SEC suspended Bhuiyan from service on March 1. Bhuiyan was found involved in share business through his wife's BO accounts and made Tk 80 lakh in a windfall profit violating rules and misusing power.

Summary:
The Securities and Exchange Commission formed a panel to probe charges against a brokerage house of providing more loans than permitted to a client to buy shares, SEC officials said yesterday. NBL Securities approved the loans for Roksana Akter, wife of Anwarul Kabir Bhuiyan, an SEC executive director who faces suspension on charges of his involvement in last year's share scam. The regulator asked the two-member committee, led by SEC Director Mahbub-ur-Rahman, to submit a report to the commission in 15 workdays. Obidul Islam, deputy director of the SEC, is the other member of the committee. The committee found that the brokerage house gave Tk 3.2 crore as loan to the BO (beneficiary owner) account of Roksana, against a deposit of Tk 3 lakh. When the loan was sanctioned, the margin ratio was within 1:2, which means a client can borrow a maximum of Tk 6 lakh against a deposit of Tk 3 lakh. The SEC suspended Bhuiyan from service on March 1. Bhuiyan was found involved in share business through his wife's BO accounts and made Tk 80 lakh in a windfall profit violating rules and misusing power.

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Wednesday, 21st March 2012 2012 SEC fines directors of four junk firms
The Securities and Exchange Commission yesterday fined all directors of four junk companies Tk 1 lakh each for failing to submit quarterly financial reports to the regulator.The stockmarket regulator imposed the fine at a meeting, presided over by its Chairman Prof M Khairul Hossain, according to a statement.The companies, whose directors were fined, are: Amam Sea Food, Raspit Inc, Dhaka Fisheries and Khawza Mosaic Tiles. At yesterday's meeting, the SEC also approved the rights offer of Keya Cosmetics, which will issue one rights share for an existing share at an offer price of Tk 20, including Tk 10 in premium.The company will raise Tk 148 crore by issuing 7.39 crore ordinary shares, and will use the proceedings to repay bank loans and the rest amount as working capital.Prime Finance Capital Management is the issue manager of Keya Cosmetics' rights offer.

Summary:
The Securities and Exchange Commission yesterday fined all directors of four junk companies Tk 1 lakh each for failing to submit quarterly financial reports to the regulator. The stockmarket regulator imposed the fine at a meeting, presided over by its Chairman Prof M Khairul Hossain. The companies, whose directors were fined, are: Amam Sea Food, Raspit Inc, Dhaka Fisheries and Khawza Mosaic Tiles.At yesterday's meeting, the SEC also approved the rights offer of Keya Cosmetics, which will issue one rights share for an existing share at an offer price of Tk 20, including Tk 10 in premium. The company will raise Tk 148 crore by issuing 7.39 crore ordinary shares, and will use the proceedings to repay bank loans and the rest amount as working capital. Prime Finance Capital Management is the issue manager of Keya Cosmetics' rights offer.

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Monday, 26th March 2012 2012 ICB to waive interest for 10,000 investors
Around 10,000 retail investors will get an interest waiver on their margin loans that they took from the Investment Corporation of Bangladesh (ICB) during fiscal 2010-11 for share purchase.At a board meeting on Thursday last, the state-run investment corporation decided to waive interest worth around Tk 14 crore for 9,974 retail investors, ICB officials said.The Tk 14 crore interest is half of the amount that 9,974 retail investors were supposed to pay in a year.The ICB took the decision in line with a compensation package approved by the government last month. As per the compensation package, the small investors, who suffered financial losses due to the last year's stockmarket debacle, will get a waiver of up to 50 percent of the interest on margin loans.A small investor will be an individual who deposited Tk 10 lakh or less of own money in beneficiary owner's (BO) account and incurred losses.The retail investors will, however, have to apply to the state-run investment corporation to get the interest exemption facility, the ICB officials said.As per the compensation package, the retail investors are also given 20 percent quota of all initial public offerings (IPOs) -- government and private -- to be issued in 2012 and 2013. It means, if an IPO size is Tk 100 crore, Tk 20 crore will be allotted for the small investors who incurred capital losses.The government in October last year announced a stimulus package for stockmarket investors to restore stability in the market.On November 27 of 2011, the government formed a seven-member special committee to identify the small investors who lost money, and how much they lost. Md Fayekuzzaman, managing director of the ICB, was made the convener. The committee had found that the number of adversely affected small BO accounts is 15.26 lakh, and the amount of total interest on loans in such accounts is Tk 499 crore.However, the total number of adversely affected BO accounts is 17.84 lakh, and the total amount of loss suffered by those accounts is Tk 22,300 crore.The committee had come up with the data by analysing the losses incurred between January 2009 and November 2011.

Summary:
Around 10,000 retail investors will get an interest waiver on their margin loans that they took from the Investment Corporation of Bangladesh (ICB) during fiscal 2010-11 for share purchase. The ICB took the decision in line with a compensation package approved by the government last month. As per the compensation package, the small investors, who suffered financial losses due to the last year's stock market debacle, will get a waiver of up to 50 percent of the interest on margin loans. A small investor will be an individual who deposited Tk 10 lakh or less of own money in beneficiary owner's (BO) account and incurred losses. The retail investors will, however, have to apply to the state-run investment corporation to get the interest exemption facility, the ICB officials said.As per the compensation package, the retail investors are also given 20 percent quota of all initial public offerings (IPOs) -- government and private -- to be issued in 2012 and 2013. It means if an IPO size is Tk 100 crore, Tk 20 crore will be allotted for the small investors who incurred capital losses. The committee had come up with the data by analyzing the losses incurred between January 2009 and November 2011.
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Friday, 30th March 2012 2012 BB warns financial institutions against unauthorized investments
The central bank yesterday warned financial institutions (FIs) that set up subsidiaries against the law and instructed them to withdraw investments from those companies by September 30.It is observed that some financial institutions are investing beyond the law by forming subsidiaries, Bangladesh Bank said in a statement. So, investment risks are growing.Some FIs formed subsidiaries even in real estate, a practice that goes against the Financial Institution Act 1993, a senior BB official said, justifying the central bank's latest move. Four to five financial institutions have set up such subsidiaries and a few others are in the pipeline, the official said.The notice attracted mixed reactions from the chief executives of the institutions.The central bank has opened many windows for finance companies. It is unnecessary to form subsidiaries in the first place, said Shamsul Arefin, managing director of Uttara Finance.It also involves huge costs.Selim RF Hussain, managing director of IDLC Finance, said the financial institutions should concentrate on areas that support their core areas. But Asad Khan, managing director of Prime Finance, said FIs might need such subsidiaries because of the nature of business.We own properties because of the nature of our business, but we don't have the expertise in selling properties, said Khan, also the president of Bangladesh Leasing and Finance Companies Association.He said the financial institutions have to deal with a lot of mortgage, especially with lands, and officials face trouble in finding buyers.However, Khan said the institutions would follow the BB's instruction. Financial institutions, also known as non-bank financial institutions, are regulated by the central bank.Thirty-one FIs operate in Bangladesh: two government-owned, one is the subsidiary of a state-owned bank, 13 are owned by local private investors and 15 are joint ventures.The major sources of funds of the FIs are term deposits (at least six-month tenure), credit facility from banks and other FIs, call money as well as bonds and securitisation. The major difference between banks and FIs is that FIs cannot issue cheques, pay-orders or demand drafts and cannot receive demand deposits. In addition, FIs cannot be involved in foreign exchange financing.

Summary:
The central bank yesterday warned financial institutions (FIs) that set up subsidiaries against the law and instructed them to withdraw investments from those companies by September 30. Some FIs formed subsidiaries even in real estate, a practice that goes against the Financial Institution Act 1993, a senior BB official said, justifying the central bank's latest move. The notice attracted mixed reactions from the chief executives of the institutions. According to the officials at different financial institutions, it will involve huge costs to them.

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Financial institutions, also known as non-bank financial institutions, are regulated by the central bank. Thirty-one FIs operate in Bangladesh: two government-owned, one is the subsidiary of a state-owned bank, 13 are owned by local private investors and 15 are joint ventures. The major sources of funds of the FIs are term deposits (at least six-month tenure), credit facility from banks and other FIs, call money as well as bonds and securitization. The major difference between banks and FIs is that FIs cannot issue checks, pay-orders or demand drafts and cannot receive demand deposits. In addition, FIs cannot be involved in foreign exchange financing.

Monday, April 2, 2012

DSE halts execution of two proposals for gifting 1.94 million shares Dhaka Stock Exchange (DSE) has halted the execution of two proposals for gifting 1.94 million shares to two bank directors saying that a substantial amount of the shares were purchased by breaching the insider trading rules, officials said.The situation comes after two wives of two bank directors recently have applied to the DSE for gifting their husbands this amount of shares, of which 6,55,700 shares were purchased after a price sensitive information regarding the minimum stakes by sponsor-directors.The DSE has also sought the opinion of the Securities and Exchange Commission (SEC) whether they would approve the proposals or not.A top SEC official said the securities regulator has already formed three committees to look into the matters of share gift by breaching insider trading rules."Definitely, it's a clear violation of insider trading rules if any sponsor-director purchases shares without making any declaration," the SEC official told the FE. As per securities rules, the sponsor-directors are to purchase or sell shares within thirty days of making declaration.In a letter, the authorities of the DSE told the SEC that the process of purchasing the said amount of shares may be considered as the violation of insider trading rules, as the directors' wives purchased the shares for gifting purpose after the SEC has issued a directive on minimum shareholding portion for sponsor-directors ."We think the process of purchasing a substantial amount of shares by the wives of two banks' directors is a violation of insider trading rules. Nevertheless, we have sought the opinion of the securities regulator in taking our decision regarding the gift proposals," the DSE officials said."Probably, such sponsordirectors made the shares purchased by their wives so that the share prices of their companies do not boost riding on their declaration."

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Summary:
SEC haults the trading because of the violation of the insider trading rules.Two wives of the two board of director of two companies accepted huge amount of shares .To escape from high payment for the share they done the trick.Their wives purchased the shares and gifted forward to them.As the director of any company cant purchase any share without declaration sec haults the trading.

Tuesday April 3 2012

SEC wont extend deadline

The Securities and Exchange Commission (SEC) has reiterated its stance on mandatory holding of individually two per cent and jointly 30 per cent shares by sponsor-directors of listed companies, said the Dhaka Stock Exchange (DSE) president."The securities regulator will not extend the deadline for the sponsor-directors of the listed companies, who are yet to comply with the SEC's directive regarding minimum share-holding," DSE President Rakibur Rahman told journalists after a meeting with the SEC chairman M Khairul Hossain Monday. It is the first meeting of the newly-elected DSE leaders with the securities regulator. Among others, DSE senior vice president Ahmad Rashid Lali and vice president Md Shajahan were also present.

On November 22, 2011, the SEC imposed the mandatory provision for the sponsor-directors, other than the independent ones, for holding individually at least two per cent of their companies' paid-up capital.Otherwise, there would be a 'casual vacancy' of director(s), and then any individual, holding five per cent or more shares, would be entitled to become a director of the respective company in its next annual general meeting (AGM).Besides, all sponsor-directors of a listed company will have to jointly hold a minimum of 30 per cent shares of their respective company's paid-up capital.The notification also said a company will not be able to offer rights share or go for repeat public offering (RPO), if its directors do not jointly hold thirty per cent shares. The sponsor-directors have been given six months' timeframe that ends on May 22 for meeting the conditions regarding holding of the minimum shares. Mr Rakibur said the sponsor-directors, who sold out a significant number of their shares at exorbitant prices during the 2010 bull-run to make hefty profit, must buy those shares back to comply with the regulator's directive, if they
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want to retain their directorship."The sponsor-directors must purchase their shares within the deadline, as the SEC chairman has told us that the deadline will not be extended or changed." Mr Rakib also urged the directors to resign from their position, instead of finding loophole, if they cannot buy the required number of shares.He said in the next three days the DSE will issue a reminder to the sponsor-directors, who are yet to buy their respective company's shares. The DSE has urged the SEC to take steps so that the sponsor-directors' shares are sold only in the block market, he also said. Transparency and accountability should be ensured in the capital market through strong surveillance, the DSE president added."We are going to introduce international-standard surveillance software, and a contract will be signed within one month with Standard and Poor's (S & P), an international company."He said the companies listed on the stock market must maintain international standard in their financial statements.

Mr Rakib said they have urged the SEC to ensure transparency and accountability, so that the companies cannot confuse the investors by disseminating false information through their balance-sheets.He also advised the investors not to pay heed to rumours in making their investment decisions.According to the DSE, a total of 1,491 sponsor-directors hold less than two per cent shares of their respective companies, and most of them are yet to make their declaration of purchasing shares

Summary:
The Securities and Exchange Commission (SEC) has reiterated its stance on mandatory holding of individually two per cent and jointly 30 per cent shares by sponsor-directors of listed companies, said the Dhaka Stock Exchange (DSE) president."The securities regulator will not extend the deadline for the sponsor-directors of the listed companies, who are yet to comply with the SEC's directive regarding minimum share-holding," DSE President Rakibur Rahman told journalists after a meeting with the SEC chairman M Khairul Hossain Monday. It is the first meeting of the newly-elected DSE leaders with the securities regulator. Among others, DSE senior vice president Ahmad Rashid Lali and vice president Md Shajahan were also present.

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Thursday April 5 2012

BB approves three NRB banks

The central bank has approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) on the condition that those would contribute to boosting the inflow of foreign exchange, officials said.The decision came at a meeting of the board of directors of Bangladesh Bank (BB), held at its central office Wednesday, with BB Governor Atiur Rahman in the chair.The three approved NRB banks are: NRB Commercial Bank Limited, NRB Bank Limited and NRB Bank Limited. The name of one NRB Bank will require to be changed. The meeting of the BB board has, however, been adjourned until 1:30 pm on April 8 (Sunday) for taking the final decision on approval of other private commercial banks (PCBs), sponsored by local entrepreneurs."The board will take the final decision on other PCBs Sunday next after a thorough scrutiny of applications one by one," Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting.He also said the board approved three NRB banks, imposing conditions relating to their contributions to international trade and inward remittance. "The approved NRB banks will have to play a strong role in selling of foreign currency treasury bonds abroad," Mr Chowdhury said adding that the government is now planning to float sovereign bond which will be sold by the NRB banks in the overseas markets. Farasat Ali and Nizam Chowdhury, now living in the United States, have applied for the NRB Commercial Bank and NRB Bank respectively, as chairmen.Another applicant, Iqbal Ahmed, who is residing in the United Kingdom, has applied for a bank, also named as NRB Bank with himself being its chairman."We'll ask the entrepreneurs to change the name of an NRB bank since two applications were approved with the same name. But the name of sponsors will remain unchanged," the BB deputy governor said while replying to a query relating to two NRB banks bearing the same name.The new NRB bank will be established with a paid-up capital of not less than Tk 4.0 billion. The shareholding of the NRB bank will be 50 per cent from the NRB sponsors and the rest 50 per cent will be collected through public offerings. "The authorities concerned of the approved NRB banks would have to deposit the amount of their paid-up capital with the local commercial banks in foreign currency," another BB official said, adding that the central bank will issue licences to the NRB banks, only after receiving their money against the paid-up capital."The letters of intent will be issued to the approved NRB banks by the end of next week, after approval of the minutes of the board meeting," the central banker said, adding that the NRBs may play a pivotal role in further deepening of the operations in the country's financial sector by extending their valuable contributions.Each sponsor of the NRBs will have to hold a minimum stake of Tk 100 million in the holding of shares and the maximum stake will be 10 per cent of the bank's total paid-up capital.
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The central bank earlier decided in principle to grant licence to a new banking company to be set up by NRBs, in pursuant to section 31 of the Bank Company Act, 1991, after considering the need and overall strategy that is congenial to the pursuit of an effective monetary policy for the country's financial sector. The BB sought amplifications from the interested entrepreneurs for setting up of NRB banks on March 7 last year. The last date for submission of applications was May 31, 2011.After scrutiny by three committees of the central bank, three of the five applications were considered for setting up of the proposed NRB banks. The board could not complete the analyses of all the 16 short-listed applications for setting up of new PCBs, a BB senior official said, adding that the names of 19 proposed commercial banks, including three NRB banks, were placed before the board at its meeting on Wednesday, for final approval. Earlier, 37 applications were submitted with the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary committee, mainly due to lack of necessary papers and documents.

Summary
The central bank has approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) on the condition that those would contribute to boosting the inflow of foreign exchange, officials said.The decision came at a meeting of the board of directors of Bangladesh Bank (BB), held at its central office Wednesday, with BB Governor Atiur Rahman in the chair.The three approved NRB banks are: NRB Commercial Bank Limited, NRB Bank Limited and NRB Bank Limited. The name of one NRB Bank will require to be changed. After scrutiny by three committees of the central bank, three of the five applications were considered for setting up of the proposed NRB banks.The board could not complete the analyses of all the 16 short-listed applications for setting up of new PCBs, a BB senior official said, adding that the names of 19 proposed commercial banks, including three NRB banks, were placed before the board at its meeting on Wednesday, for final approval.Earlier, 37 applications were submitted with the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary committee, mainly due to lack of necessary papers and documents.

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Friday April 6 2012

Core inflation hits all-time high in Mar

The country's core inflation, excluding food items, hit all-time high in March at 13.96 per cent, while consumer food inflation edged down to 8.28 per cent, according to the national statistics office data released Thursday.The Bangladesh Bureau of Statistics (BBS) said the national-level general inflation also had gone downward to 10.10 per cent on point-to-point basis. It was 10.43 per cent in February.The 12-month average of inflation (April 2011 to March 2012) was registered at 10.92 per cent, BBS data said.Economists said non-food or core inflation accelerated at its fastest pace in the recent months, propelled by soaring power and fuel prices. Non-food inflation in rural areas was recorded at 14.17 per cent and 13.42 in urban areas. Ahsan H Mansur, executive director of the privately-operated think tank Policy Research Institute of Bangladesh, said the core inflation had been rising over the last few months as a 'lag effect' of the monetary policy statement. Mr Ahsan said the core inflation had remained stubbornly high also due to high exchange rate that prevailed in the December and January period."The exchange rate was high two-three months back, and it is prompting surge in the prices of non-food items," Mr Ahsan added.The economist forecast that the country's core inflation would remain high in the next two or three months.Economists said food inflation had eased mainly due to good Aus and Aman harvests. MA Taslim, a professor of Economics at the University of Dhaka told the FE: "The supply of main staples remained stable in the last month. It helped edge down the food inflation."Mr Taslim added: "I don't know whether the single-digit food inflation will be steady or not."Economists said government would miss its target of keeping inflation at single-digit for the year.Mr Taslim also said the government's target to keep the inflation at single- digit would be tough in the wake of volatility of non-food items' prices. Director General of BBS Md Shahjahan Ali Mollah said the country's overall inflation had eased as the open market sales of rice and wheat by the government helped in the decline of food inflation.During March last, 15658 tonnes of rice were sold through OMS at a price of Tk 24 per
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kilogramme (kg). 34073 tonnes of wheat also sold at a price of Tk 17 a kg.Mr Shahjahan said the prices of rice, edible oil, spices and other necessary food items fell last March.Surge in core inflation in March was particularly driven by volatile prices of clothing, healthcare, transport, furniture, household and laundry items.The BBS chief said the wage rate index had increased to some extent in March, meaning the purchasing power of the people had gone up.The wage rate index was 6639.85 in March against 6595.37 in February.Mr Shahjahan claimed that the wages had spiked more than the inflation rate.

Summary
The country's core inflation, excluding food items, hit all-time high in March at 13.96 per cent, while consumer food inflation edged down to 8.28 per cent, according to the national statistics office data released Thursday.The Bangladesh Bureau of Statistics (BBS) said the national-level general inflation also had gone downward to 10.10 per cent on point-to-point basis. It was 10.43 per cent in February.The 12-month average of inflation (April 2011 to March 2012) was registered at 10.92 per cent, BBS data said.Economists said non-food or core inflation accelerated at its fastest pace in the recent months, propelled by soaring power and fuel prices.

Monday April 9 2012

Six more new banks get BB approval

The decision came at a meeting of the BB's board of directors, held at its central office Sunday, with BB Governor Atiur Rahman in the chair.The six approved PCBs are: Union Bank Limited, Modhumoti Bank Limited, the Farmers Bank Limited, Meghna Bank Limited, Midland Bank Limited and South Bangla Agriculture and Commerce Bank Limited."The board has approved the six PCBs after a thorough scrutiny of all 16 short-listed applications one by one," Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting.He also said the board has also decided to issue letters of intent (LoI) to the approved six PCBs, giving them a period of six months to comply with the existing rules and regulations for setting up new commercial banks."We'll issue licenses to the PCBs after their proper compliance with all conditionalities," Mr. Sur said, adding that loan defaulters and tax evaders would not be allowed to be the directors of new banks. The proposed chief executive officers (CEO) of the approved PCBs will have to present their business plan before the board, he said while explaining the conditionalities for the new banks.

The authorities concerned of the approved PCBs will have to deposit the amount of their paid-up capital worth Tk 4.0 billion with the central bank, before starting their operation, the BB deputy governor 34

added."All the applicants are Bangladeshi citizens. The BB board has considered those who were found eligible, based on their qualifications," he said replying to a query if the approvals were given only to Awami League (AL)-affiliated people.The proposed chairmen of newly-approved banks are: Union Bank Limited -- Shahidul Alam, Modhumoti Bank -- Humayun Kabir, Farmers Bank -- Dr Mohiuddin Khan Alamgir, Meghna Bank -- AHN Ashiqur Rahman MP, Midland Bank -- Moniruzzaman Khandker and South Bangla Agriculture and Commerce Bank -- SM Amjad Hossain."Since bank licences were last issued in 2000-01, there have been many significant developments in the Bangladesh economy," the central bank said in a statement, explaining the economic context and rationale behind issuing new bank licences.

The economy has grown and the banking system has become more competitive but there are still a large number of under-banked people in Bangladesh, the BB added. Recent estimates from a survey conducted by the Institute of Microfinance found that only 45 per cent of the nearly 9000 households surveyed do have access to banks and micro-finance institutions (MFIs) for loans. The population per branch (21065) and the ratio of loan accounts per 1000 adults (42) suggest that the outreach of the formal financial sector in Bangladesh is lower than that in India (14485 and 124 respectively) and Pakistan (20340 population per branch and 47 loan accounts per 1000), according to the statement."As such, the new banks will help increase the quality of banking services by increasing competition in the banking sector. They will also be able to meet the unfulfilled demand for credit by the private sector whose needs have grown in line with a fast expanding economy," it noted. Moreover, for new banks the ratio of opening rural and urban branch will be 1:1 which will help increase bank branches in rural areas and improve financial inclusion, the central bank said. Earlier, 37 applications were submitted to the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary scrutiny committee mainly due to lack of necessary papers and documents.Last Thursday, the central bank approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) to help boost the inflow of foreign exchange.Currently, a total of 47 commercial banks are in operation in Bangladesh.

Summary:
The decision came at a meeting of the BB's board of directors, held at its central office Sunday, with BB Governor Atiur Rahman in the chair.The six approved PCBs are: Union Bank Limited, Modhumoti Bank Limited, the Farmers Bank Limited, Meghna Bank Limited, Midland Bank Limited and South Bangla Agriculture and Commerce Bank Limited."The board has approved the six PCBs after a thorough scrutiny of all 16 short-listed applications one by one," Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting.He also said the board has also decided to issue letters of intent (LoI) to the approved six PCBs, giving them a period of six months to comply with the existing rules and regulations for setting up new commercial banks."We'll issue licenses to the PCBs after their proper compliance with all conditionalities," Mr. Sur said, adding that loan defaulters and tax evaders would not be allowed to be the directors of new banks. The proposed chief executive officers (CEO) of the approved PCBs will have to present their business plan before the board, he said while explaining the conditionalities for the new bank.

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Saturday, April 14, 2012

BB to measure 'core inflation'

Inflation Bangladesh is going to introduce the system of measuring 'core inflation' along with the existing headline inflation to help formulate credible monetary policy and forecast inflation, officials said.Core inflation is a measure of inflation which excludes temporary noise components, notably food and fuel, from consumers' price index (CPI) basket.The key objective of computing core inflation is to separate the components of 'headline inflation', officially known as general inflation, that are caused by non-monetary events as these price changes do not reflect the impact of underlying monetary policy decisions. The central bank has already calculated core (non-food, non-fuel) CPI inflation using data of the Bangladesh Bureau of Statistics (BBS) on trial basis which will be used by the policy makers in the near future. "We've calculated the core inflation on the basis of BBS data," a senior official of the Bangladesh Bank (BB) told the FE, adding that such inflation measuring method will help implement the BB's monetary policy efficiently.The core inflation rose to 10.54 per cent in March last from 10.15 per cent of the previous month, according to the central bank estimate.The country's inflation as measured by CPI eased slightly last month on the point-to-point basis mainly because of decrease in prices of food items.The inflation rate came down to 10.10 per cent in March 12 from 10.43 per cent of the previous month on the point-to-point basis, the BBS data showed.On the other hand, the annual average inflation also came down to 10.92 per cent in March last from 10.96 per cent of the previous month. In South and Southeast Asia, many countries including Pakistan, the Philippines, Sri Lanka and Thailand regularly publish and monitor the core inflation. "The core inflation provides a better measure of inflation and constitutes a more consistent short term policy guide mainly, monetary policy to understand inflationary pressure in the country's economy," another BB official said, mentioning deference of movement of CPI and core inflation."There is no usefulness of the 12month moving average to formulate a short-term monetary policy," the central banker said, adding that the 12-month average inflation always follow the point-to-point inflationary trend. Currently, the central bank monitors the 12- month moving average of CPI inflation in defining the underlying trend that averages out the short-term or transitory components (seasonal impact) in the CPI.

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Summary:
Bangladesh is going to introduce the system of measuring 'core inflation' along with the existing headline inflation to help formulate credible monetary policy and forecast inflation, officials said.Core inflation is a measure of inflation which excludes temporary noise components, notably food and fuel, from consumers' price index (CPI) basket. The key objective of computing core inflation is to separate the components of 'headline inflation', officially known as general inflation, that are caused by non-monetary events as these price changes do not reflect the impact of underlying monetary policy decisions. The central bank has already calculated core (non-food, non-fuel) CPI inflation using data of the Bangladesh Bureau of Statistics (BBS) on trial basis which will be used by the policy makers in the near future.

Conclusion
There is a famous saying ,money never sleeps. There do have so many people who lose their sleeps due to money. And not surprisingly there are authorities with little sleep to protect money from guilty hand. But what will happen if the authority becomes Frankenstein and starts malpractice which causes devastation of millions of people. Mere rules will not be able to protect investor, it needs to be practically implemented .As money and greed are positively correlated mere having trust on the authority will not be good one. We must also be careful and meticulous .We need to lower our expectation ,be practical and be tranquil on our way to financial gaining because it takes time to grow and if one ends up with peak then he/she can reign.

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