Government moves to boost portfolio investment

The government yesterday exempted four foreign banks from the mandatory requirement of a subsidiary to participate in the stock market for the sake of development of the capital market.

The four banks are: Standard Chartered Bank, Citibank NA, HSBC and Commercial Bank of Ceylon.

The move comes after the central bank last month, as per the Banking Companies Law, sought the finance ministry’s opinion on the matter in a bid to boost portfolio investment.

The recently amended law has made it compulsory for banks to form a separate subsidiary if they want to offer share market services — a time-consuming and tricky process for foreign banks.

To form the subsidiary, the foreign banks would require approval from their headquarters, which, in turn, would require authorization from their regulators.

As the size of the capital market in Bangladesh is still small, the headquarters of the foreign banks are unlikely to give permission for separate subsidiaries.

A high official of the central bank said the four banks have been providing custodian services to foreign multinational banks and financial institutions in the share market.

The amount of portfolio investment of the foreign financial institutions through Standard Chartered Bank, Citibank NA, HSBC and the Commercial Bank of Ceylon is more than $1.2 billion.

“As these banks account for the lion’s share of the external portfolio investment in the country, the problem caused by the recently amended law should be resolved,” the central bank told the finance ministry.

“Otherwise, the stability of the stock market might be hampered,” it added.

News Source:

The Daily Star

Dated:- 02-Nov-2013