STOCK COMPENSATION PACKAGE
Brokers, merchant bankers unwilling to waive interestAhmed Shawki
A full implementation of the stock market compensation package announced by the government seems unlikely as the merchant bankers and the brokerage firms are reluctant to waive interests on loans given to the investors.
Market insiders said the merchant banks and the brokerage houses were taking advantage of the government announcement as the government, in its order, did not make such waiver mandatory.
No merchant bank or brokerage house, except state-run Investment Corporation of Bangladesh, waived interests on margin loans given to its clients after two months from the government’s order on the matter.
Finance minister Abul Maal Abdul Muhith on March 4 announced that 50 per cent of the past year’s margin loan interest will be waived and a 20-per cent quota in IPOs will be allotted for small-scale investors who suffered losses because of the 2011 stock plunge.
The announcement was followed up two days later by an order from the finance ministry to the merchant banks and the brokerage firms.
The order said those who invested less than Tk 10 lakh and had a beneficiary owners’ account in between January 2009 and November 2011 would be ‘eligible’ for the interest waiver.
It also said that the amount of waiver would not exceed the capital loss of the investors.
The remaining half of the interest, accrued last year, will then be transferred to a block account and no further interest will be charged on it and the investors will be allowed to pay the money in quarterly instalments spread over a three-year period, the order said.
‘The private merchant banks perhaps will not waive the interest as the government did not make it mandatory,’ a member of the compensation committee told New Age last week.
‘If the government made it mandatory, it would have to pay the money to the merchant banks and the brokerage houses. So, the government’s announcement for waiver was an eye-wash,’ he said.
He said only the state-owned merchant banks would waive the interest just to keep the government in the safe spot.
‘Yes, the ministry order did not make such waiver mandatory. But, that is not a concern as we, merchant banks, agreed to waive the interest considering the national interest,’ Mohammad A Hafiz, president of the Bangladesh Merchant Bankers Association, told New Age on Saturday.
He said the merchant banks were working on the matter.
‘Now, it is individual merchant bank’s choice how they will waive the interest. I know many of them have sent proposals to their respective boards and waiting for replies,’ he said when asked about the delay in implementing the waiver order.
According to data from a committee that designed the compensation package, Tk 130.20 crore was the total amount of interests which was to be waived under the compensation package.
Of the total, Tk 70.35 crore margin loan interests were incurred at 31 merchant banks while Tk 59.85 crore at 27 brokerage firms, the compensation committee data showed.
So far, only the ICB board in late March decided to waive interest of Tk 7.24 crore for its 7,584 investors.
After a free-fall in share prices in 2011, prime minister Sheikh Hasina in November last year asked the SEC to work out a package to minimise the losses incurred by investors in the crash.
The commission, in line with the prime minister’s order, announced first a stock market stimulus package containing short-, mid-, and long-term measures and then formed a six-member committee to recommend a compensation scheme.
The committee, headed by ICB managing director Mohammad Fayekuzzaman, put forward a proposal on compensation in late January this year. The proposal was the basis of the finance minister’s March 4 announcement.
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