12 banks become shareholders of bourses’ clearing company

Twelve banks have become shareholders of Central Counterparty Bangladesh Limited, a proposed clearing and settlement company of Dhaka and Chittagong stock exchanges.

The company will settle trading activities, which will reduce settlement risk, provide trading anonymity and make the settlement operations more efficient, bourse sources said.

The 12 banks are: Mutual Trust Bank, Agrani Bank, Prime Bank, Mercantile Bank, Modhumoti Bank, NRB Bank, National Bank, National Credit and Commerce Bank, NRB Global Bank, Rupali Bank, Social Islami Bank and Standard Bank.

The company would allocate 15 per cent of its shares worth Tk 45 crore to the banks — equal number of shares to each bank. Each bank will be allocated 37.50 lakh shares worth Tk 3.75 crore.

Dhaka Stock Exchange on January 2 submitted documents to Registrar of Joint Stock Companies and Firms to get registration for CCBL. The company will get shape within a couple of weeks, DSE officials said.

Initially 26 banks had showed their interest to become shareholders of the company, but 14 of them backtracked on their decision due to a securities rule that bars any CCBL shareholder from participating in the settlement mechanism.

As per the CCP rules, a bank cannot get the licence for participation in the clearing and settlement mechanism if it owns shares in CCBL.

DSE officials said the 14 banks decided not to be shareholders of the company as they felt that participation in the settlement process would be more profitable than being shareholders of the company.

The 14 banks are: Bank Asia, Jamuna Bank, BRAC Bank, Dhaka Bank, Eastern Bank, IFIC Bank, Jamuna Bank, ONE Bank, Pubali Bank, Shahjalal Islami Bank, Southeast Bank, Premier Bank, United Commercial Bank and NRB Commercial Bank.

As per the finalised rules, stock exchanges jointly hold 65 per cent of the company’s shares. Of the stock exchanges’ portion, DSE holds 45 per cent and Chittagong Stock Exchange 20 per cent.

Banks hold 15 per cent of the company and Central Depository Bangladesh holds 20 per cent that includes 10 per cent to be transferred later to a strategic investor.

The company will be registered by the name of ‘Central Counterparty Bangladesh Limited’ with an authorised capital of Tk 500 crore and paid-up capital of Tk 300 crore. A total of 30 crore shares will be issued at face value of Tk 10 each.

The board of the company will be formed with seven independent directors, six shareholding directors and a managing director.

DSE chairman Abul Hashem and managing director KAM Majedur Rahman, CSE managing director Saifur Rahman Mazumder, CDBL vice-chairman AKM Nurul Fazal Bulbul and Mutual Trust Bank chief Executive officer Anis A Khan have become shareholding directors of the company. The rest one shareholding director would come from a strategic investor.

The independent directors would be nominated later with BSEC approval.

The clearing and settlement provided by each exchange sends provisional and final securities settlement instructions to CDBL and manages cash transfer at the paying banks, market experts said.

The current settlement process carries considerable risk for the exchanges as there is a lack of capital adequacy at the particular level that may impact on the stability of the market in times of market stress, they said.

DSE managing director KAM Majedur Rahman said that CCBL was being established to mitigate the risks associated with clearing and settlement of equities and to promote the emergence of vibrant derivatives.

Bangladesh Securities and Exchange Commission and the bourses took the initiative to form the company to facilitate introduction of new products in the country’s capital market, bourse sources said.