Provisioning against margin loan portfolio deferred

In response to the ongoing downturn in the stock market, the securities regulator has extended its hand to the stockbrokers and merchant banks that failed to comply with provisioning requirements.

Stockbrokers and merchant banks that failed to ensure the provisioning against the unrealised losses in their portfolio of margin loans given to clients would have time till 31 January, 2025, said the Bangladesh Securities and Exchange Commission (BSEC) today (28 March).

Regulatory officials said, the time relaxation has been granted in response to the industry requests so that the pressure for in-time compliance does not intensify forced selling in the ailing stock market.

Brokers and merchant banks provide loans to their interested clients for buying additional stocks and in the declining market it reduces their equity due to unrealised losses. As lenders, brokers and merchant banks need to set aside the provision from their income against the unrealised losses.

However, the losses in the margin loan portfolio, if already realised by selling shares, will be subject to timely provisioning.

Bangladeshi capital market intermediaries have long been enjoying such exemptions and deferrals in complying with the accounting standards as the regulator responds to the industry pleas amid a prolonged weaker secondary market condition that causes investors' capital erosion amid poor turnover in the stock market.