Market recovery cools as regulators fight over oversight of asset management companies
The benchmark of the Dhaka Stock Exchange saw a 3.4% erosion last week as daily turnover fell below Tk 1,000 crore for the first time in seven months previous ones. Mahmud Hossain Opu / Dhaka Tribune
BSEC official said sometimes the Bangladesh Bank oversteps its jurisdiction, which can send the wrong message to investors
The country’s two main financial regulators – Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC) – disagree again, this time over the oversight of asset management companies.
In response to a recent letter issued by the central bank asking asset management companies for information on their assets and liabilities, the capital market regulator issued a strong warning, telling the Bangladesh Bank that this would not be possible.
Analysts believe such conflicts between the two regulators will have a major impact on businesses.
Indeed, the series of brawls underway between the capital market regulator and the central bank has already slowed down a stock market recovery as several investors show signs of waiting in the face of such periods of uncertainty.
The benchmark of the Dhaka Stock Exchange saw a 3.4% erosion last week as daily turnover fell below Tk 1,000 crore for the first time in seven months previous ones, showed the stock exchange website.
Mohammad Rehan Kabir, researcher and stock analyst, said the capital market saw positive growth of 20-30% earlier this year compared to last year.
Read also – Policies put Bangladesh Bank and BSEC at odds
“But all of a sudden the last few months have seen a lot of ups and downs. One of the reasons for this is the lack of coordination between the two regulators; investors can suffer from insecurity, ”he added.
What started the fight?
Investor sentiment was first thwarted when the central bank began examining irregularities in planned banks’ exclusive capital market investments, both in dealer investment and under the special fund. Tk200 crore, according to market insiders.
Subsequently, a dispute arose between regulators over whether publicly traded banks can provide the unclaimed dividends to the newly formed Capital Market Stabilization Fund on the basis of existing laws.
Market sentiment took another hit last week with news that Sonali Bank, one of the country’s largest banks, slightly exceeded its capital markets exposure limit of 25% of its total capital and rose above 26%, according to a central bank official.
The information has made several institutional investors cautious about a potential adjustment in capital market exposure by overexposed banks that could slow the market, said a stock broker asking not to be named.
The BSEC, however, has scheduled a meeting with the Bangladesh Bank this week to address several issues, including the capital market exposure limit, the transfer of unclaimed dividends to the Capital Market Stabilization Fund and allowing listed banks to pay adequate dividends for the current year, said a source working at the top of the capital market regulator.
Listed banks contribute a sixth of the total market capitalization of the Bangladesh stock market, according to the weekly market review of EBL Securities Ltd.
And then, on November 10, the Bangladesh Bank sent a letter to the CEOs of asset management companies, in which it said that financial investigation activities should include the assets and liabilities of other financial institutions. .
He suggested changes, improvements and additions to the survey forms.
The letter also requested that the assets and liabilities of asset management companies as well as the assets and liabilities of mutual funds managed by the companies be included in the investigations.
Serajul Islam, executive director and spokesperson for the Bank of Bangladesh, said various international organizations, including the International Monetary Fund (IMF), are also asking them for such information.
“These must be provided to them, the same thing happened in this case. There’s nothing else here – the data is still being searched, that’s to be expected, ”he told Dhaka Tribune.
The letter also mentioned that the information had been sought in accordance with IMF recommendations.
Read also – Bank profits shine as recovery continues
But on November 18, the securities regulator sent a counter letter to Fazle Kabir, the governor of Bangladesh Bank, asking the central bank to refrain from asking companies for such information.
“The capital market is a very sensitive market,” said a senior BSEC official.
“In order to maintain market stability, they [Bangladesh Bank] were urged to cooperate by refraining from seeking information, data or reports directly from any person or organization involved in the capital market, ”he said, preferring to remain anonymous.
“Bangladesh Bank suddenly became more focused on capital market issues by avoiding their main job. Sometimes the central bank interferes outside its jurisdiction, which can send the wrong message to investors, ”the official also added.
According to BSEC sources, 51 asset management companies were licensed and registered between 2001 and 2021.
Of these, 41 companies are operational and 10 are inactive. Efficient companies currently manage assets worth around Tk 13,000 crore. Apart from that, there are 21 other asset management companies.