Merchant bankers renew plea for extension of provisioning deadline till 2030

Infographics: TBS

Merchant bankers have once again urged the Bangladesh Securities and Exchange Commission (BSEC) to allow gradual provisioning by 2030 against long-standing issues, including negative equity in clients' margin accounts and unrealised losses in their own portfolios.

Despite demands from stock brokers and merchant bankers previously, both key stakeholders in the capital market, to extend the deadline until 2030, the BSEC last month extended the provisioning facility only until December 2025, subject to the submission of a board-approved plan.

The DSE Brokers Association, an association of stock brokers, wrote in December seeking an extension until 2030. The Bangladesh Merchant Bankers Association (BMBA) also wrote to the regulator in mid-April seeking the extension.

Meanwhile, on Monday, in a meeting with BMBA members held in a hotel, they again unanimously agreed to request the stock market regulator to extend the provisioning facility for another five years.

Muhammad Nazrul Islam, general secretary of BMBA, told TBS, "The capital market has not been in good shape for a long time. In this situation, none of the stakeholders in the market is doing well. Ensuring provisioning under these circumstances requires time."

In a letter at the mid of mid-April, the BMBA said that when the market began to decline sharply in the third quarter of 2021, many merchant bankers invested in anticipation of high returns.

"However, the continued market downturn and heightened volatility significantly impacted portfolio positions. Additionally, the challenging market environment has made it increasingly difficult for merchant bankers to manage margin loans in client accounts, resulting in a surge in negative equity levels," the letter stated.

The BMBA proposed gradual provisioning at 5% by 2025, followed by 10% in 2026, 15% in 2027, 20% in 2028, 25% in 25% and 25% in 2023.