Tk9,367cr provision gap: BSEC orders Dhaka exchange to ensure lenders' quarterly reporting 

Infographics: TBS

The Bangladesh Securities and Exchange Commission (BSEC) has instructed the Dhaka Stock Exchange (DSE) to ensure that stockbrokers and merchant banks submit quarterly reports on negative equity, unrealised losses and related provisioning.

The move follows the discovery that several margin lenders failed to comply with a regulatory order issued in November, requiring quarterly submissions alongside board-approved action plans.

According to BSEC data, the total provisioning deficit against negative equity and unrealised losses stood at Tk9,367 crore as of May.

Under the November directives, stockbrokers, dealers and merchant banks must continue submitting the reports until the issue is fully resolved. 

During the provisioning period, no new securities may be purchased through Beneficiary Owner (BO) accounts with negative equity, although existing holdings may be sold at fair market value for adjustment. 

Lenders are also barred from charging interest on margin loans or portfolio management fees on such accounts and, during the extended period, may not declare or distribute cash dividends.

BSEC sources said some lenders obtained deadline extensions after submitting action plans, while others failed to do so and were required to complete full provisioning by December 2025.

In a letter issued last week, the commission asked the DSE to ensure all stockbrokers and merchant banks submit the prescribed quarterly reports within 10 days of the end of each calendar quarter.

BSEC Spokesperson Abul Kalam told The Business Standard, "We asked the bourses to take measures to ensure proper submission of reports to the commission."

Sumit Podder, secretary general of the Bangladesh Merchant Bankers Association (BMBA), said, "Negative equity and unrealised losses are a long-standing problem that will not be solved easily."

"Despite that, we have improved a lot in terms of maintaining provisions, as the majority of institutions received deadline extensions," he said, adding, "If the capital market performs well in the future, we hope all the lenders currently bearing these woes will be able to overcome them." 

Tk10,978cr in negative equity

BSEC documents show total negative equity stood at Tk10,978 crore at the end of May. Negative equity arises when the market value of assets securing margin loans falls below the outstanding loan balance.

Of the total, Tk7,820 crore was principal and Tk2,726.87 crore accrued interest, indicating that continued interest charges significantly contributed to the problem. Although many loans remained unrecovered, lenders continued charging interest until BSEC barred the practice for BO accounts with negative equity.

Against the total negative equity, stockbrokers and merchant banks maintained Tk3,668.46 crore in provisions, leaving a Tk7,309.61 crore shortfall.

Among them, 102 DSE trading right entitlement certificate (TREC) holders extended Tk6,033 crore in margin loans, comprising Tk4,935 crore in principal and Tk1,116 crore in interest, while maintaining Tk1,810.22 crore in provisions. Merchant banks kept Tk1,855 crore in provisions against their Tk4,920 crore in negative equity. 

Tk2,058cr deficit in unrealised losses

BSEC documents show unrealised losses reached Tk4,042 crore as of May. Unrealised losses occur when an asset's market value falls below its purchase price without being sold.

Portfolio managers are required to maintain provisions against such losses, but prolonged market volatility has eroded portfolios and weakened their ability to meet provisioning requirements.

Against the Tk4,042 crore in unrealised losses, brokerage houses and merchant banks maintained Tk1,984 crore in provisions, leaving a Tk2,058 crore deficit.