Banks must cut stock exposure by end of 2026

Staff Reporter :

Bangladesh Bank (BB) has extended the tenure of banks’ capital market special funds by nearly 22 months, until 31 December 2026 in a move aimed at maintaining stability in the financial sector amid ongoing volatility in the capital market.

The central bank also instructed banks that had established
such special funds and invested in the stock market to gradually reduce their exposure within the extended period.

The directive was issued through a circular from the Department of Off-site Supervision on Tuesday.

The special fund facility, introduced in 2020 in response to the liquidity challenges during the COVID-19 pandemic, allowed each bank to form a fund of up to Tk200 crore with a five-year maturity. That original tenure expired in February this year.

According to the circular, banks must now submit a specific action plan-approved by their respective boards of directors-to Bangladesh Bank within 30 days of the circular’s issuance.

The plan must outline a strategy for the gradual reduction of investments made through the special fund.

The implementation of this plan must be carried out properly and within the stipulated timeframe.

The circular also stated that upon the revised expiration date of 31 December 2026, any remaining investments under the special fund will be treated as part of the bank’s capital market investment portfolio-on both solo and consolidated bases-in line with Section 26K of the Bank Companies Act, 1991.

This extension is seen as a strategic step by the central bank to provide banks with a longer transition period while safeguarding the capital market from abrupt liquidity disruptions.