Now Exim, Premier banks fined for violation in stock investment

The Bangladesh Bank on Thursday fined two more banks for violating the policy in stock investment under the special liquidity support package.

The two banks, Exim and Premier, were fined Tk50,000 each, according to a central bank source.

Another four banks were warned of having their access to the special liquidity support package suspended if any further violation was found in future.

The four banks are Eastern Bank, Union Bank, Global Islami Bank and Agrani Bank.

The development came following the findings of an investigation into the banks' overplay into stocks that the central bank had launched recently.

In the latest findings, the central bank found that all six banks had invested in junk shares under the special liquidity package.

The investment policy of the special liquidity package allows banks only to invest in companies that have dividend records of at least 10% in three consecutive years.

Of the six banks, two were fined due to severe violations in stock investment and four were warned.

Soon after launching the investigation, the central bank fined two banks, NRB and NRB Commercial Bank, for violating investment policy and share price manipulation.

The central bank's findings indicate that the banks were behind the unusual hike of junk share price in the last one year.

The stock market remained vibrant in the last one year when the overall economic activities were stagnant. Share prices of 140 listed companies, mostly small-cap and junk ones, increased by 100%-1,200% in the last one year, putting retail investors at risk.

Share manipulation of the insurance sector was widely discussed among stock investors.

Shares of 48 out of 53 listed insurance companies gained prices between above 100% and 750% in the last one year, according to the Dhaka Stock Exchange (DSE).

The prices of junk and small-cap shares increased unusually without any fundamental reason or improvement in financial health or dividend declaration, which reflects that there was manipulation, said a senior executive of the Bangladesh Bank.

In February last year, the Bangladesh Bank introduced a special liquidity package under which each bank could build a fund of Tk200 crore for stock investment.

The fund was allowed to be invested into fundamental stocks following the investment policy of the package.

The special investment fund will not come under stock market exposure and banks can take refinancing from the Bangladesh Bank to build the fund.