The Ministry of Finance (MoF) has asked the Bangladesh Bank (BB) to take stern actions against the banks which invested large funds in 2009 and 2010 beyond their allowable limits.
The directive was issued by the MoF last week as the banks' over-exposure led to the recent abnormal rise of the stock market and its consequent crash.
Besides, the MoF has asked the securities regulator to re-examine the asset-revaluation reports of eight listed companies as they are suspected to be involved in making profits from the stock market, unethically, by overvaluing their assets.
The ministry gave the BB and the Securities and Exchange Commission (SEC) four-month time to implement the directives, according to the office order of MoF.
The decision of the government to take actions against the banks is being taken in accordance with the recommendations of the probe committee on share market scam, a top finance ministry official said.
The report of the probe committee revealed that some banks made hefty profits violating the rules and regulations through their transactions in the stock market during the 'bull-run'. Some of the banks, allegedly, were involved in the deliberate act of fuelling the stock prices in 2010.
The probe committee also recommended for BB's appropriate actions against the 'errant' financial institutions.
"The banks that invested heavily in the share market in violation of provision concerned of the Bank Company Act, 1991 must be punished to avert repetition of the move in future to destabilize the capital market," a top MoF official told the FE on Monday.
According to clause 26(2) of Bank Company Act, a banking company can invest a sum not exceeding 10 per cent of its liability in the capital market.
However, except two to three banks in the country all private commercial banks, which are also listed companies, crossed the limit of 10 per cent during the last two years. Some banks even had invested funds worth above 40 per cent of their liabilities (total deposit), a high official in the BB said.
A top BB official said they will act as per the directives of MoF. Imposition of hefty fines, removal of managing directors and even cancellation of licences could be the punitive measures against the errant banks, he added.
"We have started our exercise. You will see the action against the errant banks before expiry of the MoF deadline," the top official told this correspondent without elaborating.
According to the directives, SEC will have to form a five-member committee comprising chartered accountants to re-examine asset-revaluation of the suspected companies.
The companies are -- Libra Infusion, Sonali Ash Industries, Rahim Textile, BD Thai Aluminum, Orion Infusion Ltd, Ocean Containers Ltd, Shinepukur Ceramics and Eastern Insurance.
Earlier, the MoF directed the SEC to carry out further investigations into 14 different kinds of alleged gross irregularities in the capital market.
Such allegations include, among others, serial trading, share manipulation by companies and individuals and the state of affairs concerning 100 top overvalued listed companies, in the light of the findings of the probe committee on share market scam.
It also directed for enactment of a number of new laws and regulations and bringing about changes on a number of laws relating to capital market.
Asked, a top SEC official said they are now overburdened with huge tasks including normal work and other special jobs. But said they would implement all directives during the timeframe set by the ministry.
The directive was issued by the MoF last week as the banks' over-exposure led to the recent abnormal rise of the stock market and its consequent crash.
Besides, the MoF has asked the securities regulator to re-examine the asset-revaluation reports of eight listed companies as they are suspected to be involved in making profits from the stock market, unethically, by overvaluing their assets.
The ministry gave the BB and the Securities and Exchange Commission (SEC) four-month time to implement the directives, according to the office order of MoF.
The decision of the government to take actions against the banks is being taken in accordance with the recommendations of the probe committee on share market scam, a top finance ministry official said.
The report of the probe committee revealed that some banks made hefty profits violating the rules and regulations through their transactions in the stock market during the 'bull-run'. Some of the banks, allegedly, were involved in the deliberate act of fuelling the stock prices in 2010.
The probe committee also recommended for BB's appropriate actions against the 'errant' financial institutions.
"The banks that invested heavily in the share market in violation of provision concerned of the Bank Company Act, 1991 must be punished to avert repetition of the move in future to destabilize the capital market," a top MoF official told the FE on Monday.
According to clause 26(2) of Bank Company Act, a banking company can invest a sum not exceeding 10 per cent of its liability in the capital market.
However, except two to three banks in the country all private commercial banks, which are also listed companies, crossed the limit of 10 per cent during the last two years. Some banks even had invested funds worth above 40 per cent of their liabilities (total deposit), a high official in the BB said.
A top BB official said they will act as per the directives of MoF. Imposition of hefty fines, removal of managing directors and even cancellation of licences could be the punitive measures against the errant banks, he added.
"We have started our exercise. You will see the action against the errant banks before expiry of the MoF deadline," the top official told this correspondent without elaborating.
According to the directives, SEC will have to form a five-member committee comprising chartered accountants to re-examine asset-revaluation of the suspected companies.
The companies are -- Libra Infusion, Sonali Ash Industries, Rahim Textile, BD Thai Aluminum, Orion Infusion Ltd, Ocean Containers Ltd, Shinepukur Ceramics and Eastern Insurance.
Earlier, the MoF directed the SEC to carry out further investigations into 14 different kinds of alleged gross irregularities in the capital market.
Such allegations include, among others, serial trading, share manipulation by companies and individuals and the state of affairs concerning 100 top overvalued listed companies, in the light of the findings of the probe committee on share market scam.
It also directed for enactment of a number of new laws and regulations and bringing about changes on a number of laws relating to capital market.
Asked, a top SEC official said they are now overburdened with huge tasks including normal work and other special jobs. But said they would implement all directives during the timeframe set by the ministry.
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