The Central Bank (CB) is gearing to issue directions in a bid to ‘further clarify’ its recent directives on margin trading facilities which limits bank lending to buy stocks to less than 50% of total loans.
According to CB sources, this has come on the back of the Securities & Exchange Commission learning that some banks are converting margin accounts of high networth individuals to overdraft facilities, which eventually acts just like a margin facility (to purchase shares) but is defined differently in order to work around the recent restrictions.
“This is working around the regulations. By doing this they cannot get away from the ‘situation’ because their exposure remains unchanged,” a CB source told the Business Times. He added that the new rule will address this limitation. “We plan to introduce the new rules shortly,” he added further.
Last month, the CB imposed limits on commercial bank exposure to the stock market saying that margin trading facilities cannot exceed 50% of the market value of customers' share portfolios at the close of each trading day. The new guidelines issued by the regulator also say that those over the new limit should reduce exposure by March 31, 2012.
The regulator has also imposed limits on issue of guarantees to buy shares, saying they cannot exceed 50 % of the value of initial public offerings (IPO). The move came after displeasure that small investors were being unfairly shorn of a chance to invest in IPOs with a host of recent IPOs being heavily oversubscribed by big investors using bank guarantees. |
E-mail
