FE Report (September 23, 2010)
The merchant banks have decreased the margin loan ratio in order to overcome further difficulties complying with the SEC's directive regarding the NAV-based margin loan calculation, officials said.
An official of the Securities and Exchange Commission (SEC) said this Thursday based on their inspection carried out in different merchant banks.
The official also said that there was no possibility of extending the time for executing the margin loan adjustment in line with the SEC's NAV-based credit disbursement.
Earlier, the SEC asked the brokers and merchant bankers to comply with the new margin rules by September 30 next.
According to SEC's latest revised loan criteria, the merchant bankers and stock brokers are allowed to provide margin loans at 1:1 ratio to their respective clients.
But under the provision of NAV-based margin loan calculation, the clients will not be able to get the similar amount of margin loans against their deposited money at 1:1 ratio.
"Our surveillance department has found that most of the bankers have already lowered their loan ratio from the existing ratio 1:1 to 1:0.7 or 1:0.6 to lessen difficulties that might be arisen in line with the NAV-based margin loan calculation," the SEC official said.
"The merchant bankers are predicting that the margin loans, which will be provided after September 30, will not exceed the loan ratio of 1:0.5. That's why they are also trying to provide margin loans at the ratio of 1:0.5," he added.
When contacted, Sheikh Mortuza Ahmed, the chief executive officer (CEO) of the Prime Bank Investment Limited, admitted that their merchant bank was providing margin loans at the ratio of 1:0.6.
"As per NAV-based margin loan provision, our calculated margin figures say that the clients will not be able to get loans beyond the ratio of 1:0.6. That's why we are providing loans at this ratio as our precautionary initiatives," he said.
IDLC Finance Limited CEO and Managing Director Selim R.F. Khan said that his bank was also providing margin loans at the ratio of 1:0.6.
"I heard that most of the merchant banks were giving margin loans at the ratio of 1:0.6. In the near future the margin loans might be provided at the ratio of 1:0.5," he said.
"It will help our clients to get rid of possible losses," he added.
An official of the Securities and Exchange Commission (SEC) said this Thursday based on their inspection carried out in different merchant banks.
The official also said that there was no possibility of extending the time for executing the margin loan adjustment in line with the SEC's NAV-based credit disbursement.
Earlier, the SEC asked the brokers and merchant bankers to comply with the new margin rules by September 30 next.
According to SEC's latest revised loan criteria, the merchant bankers and stock brokers are allowed to provide margin loans at 1:1 ratio to their respective clients.
But under the provision of NAV-based margin loan calculation, the clients will not be able to get the similar amount of margin loans against their deposited money at 1:1 ratio.
"Our surveillance department has found that most of the bankers have already lowered their loan ratio from the existing ratio 1:1 to 1:0.7 or 1:0.6 to lessen difficulties that might be arisen in line with the NAV-based margin loan calculation," the SEC official said.
"The merchant bankers are predicting that the margin loans, which will be provided after September 30, will not exceed the loan ratio of 1:0.5. That's why they are also trying to provide margin loans at the ratio of 1:0.5," he added.
When contacted, Sheikh Mortuza Ahmed, the chief executive officer (CEO) of the Prime Bank Investment Limited, admitted that their merchant bank was providing margin loans at the ratio of 1:0.6.
"As per NAV-based margin loan provision, our calculated margin figures say that the clients will not be able to get loans beyond the ratio of 1:0.6. That's why we are providing loans at this ratio as our precautionary initiatives," he said.
IDLC Finance Limited CEO and Managing Director Selim R.F. Khan said that his bank was also providing margin loans at the ratio of 1:0.6.
"I heard that most of the merchant banks were giving margin loans at the ratio of 1:0.6. In the near future the margin loans might be provided at the ratio of 1:0.5," he said.
"It will help our clients to get rid of possible losses," he added.
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