BSEC to address negative equity on case-by-case basis

The Bangladesh Securities and Exchange Commission (BSEC) is planning to resolve the longstanding negative equity issue in the capital market on a case-by-case basis, rather than through a blanket extension of previous provisioning deadlines.

BSEC Chairman Khondoker Rashed Maqsood shared the plan during a recent meeting with heads of the top 20 brokerage firms, including LankaBangla Securities, MTB Securities, IDLC Securities, and BRAC EPL Stock Brokerage. BSEC commissioners were also present at the meeting.

A participant in the meeting told The Business Standard that the chairman likened negative equity to a "cancer" in the market. He stated that since the level of negative equity varies among firms, each brokerage will be asked to submit its status individually, based on which tailored guidelines will be issued.

"The general orders issued earlier have failed to effectively address the problem," said the participant. "The chairman made it clear that no further blanket extensions will be given."

Since the 2010 market crash, many brokerage houses have been burdened with toxic assets in the form of negative equity on both margin and dealer accounts. Under current accounting rules, firms must keep full provisioning against these amounts.

There is an estimated Tk10,000 crore in negative equity on margin accounts and around Tk4,500 crore on dealer accounts. The previous BSEC leadership had allowed firms to gradually provision for these amounts—up to 31 December 2024 for margin accounts and 29 February 2024 for dealer accounts.

Despite these allowances, most firms have struggled to meet the requirements amid persistent market weakness. Without resolving the provisioning issue, they are unable to finalize their financial statements, said a brokerage CEO.

Saifuddin, Managing Director of IDLC Securities, welcomed the Commission's move, saying, "Addressing the issue on a case-by-case basis is the right step. The Commission has said it won't extend the provisioning deadline, but it will issue an interim order allowing reduced provisioning so we can prepare our reports."

"Our market is highly leveraged because of negative equity," he said, adding, "A customised approach will offer a more practical and effective resolution."