Banks will be allowed to declare a maximum dividend of 35% instead of 30% for shareholders, much to the chagrin of stock market investors.

The decision was taken during a meeting between the Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank (BB) at BSEC Bhaban in the capital on Monday, a press release said.

The central bank will take the necessary measures, the statement said.

Last month, in an effort to safeguard the financial health of lenders who are sure to see a spike in delinquencies in the coming days due to the pandemic, the BB imposed the dividend cap.

The central bank has decided not to extend the loan moratorium facility beyond December 31 last year, a development that is expected to increase the volume of delinquent loans on lenders’ books as companies compromised by the pandemic fail to repay their loans.

To prevent banks from falling into a capital shortfall, the central bank has now set up roadblocks.

Banks that can maintain a capital adequacy ratio (CAR) of at least 15% – which is a bank’s capital reserve to cover their risk exposure – with a capital conservation buffer of 2 .5% or more without the deferred funding facility offered by the BB for the pandemic can declare up to 30% dividends with a maximum of 15% cash dividends.

Those able to maintain a CAR of 13.5% to 15% with a capital conservation buffer of 2.5% will be able to declare a total dividend of 25% with a maximum of 12.5% ​​in cash dividend.

Prior central bank approval is required to announce the dividend, the BB notice said yesterday.

In addition, banks that can retain a minimum of 11.875% capital or more with a capital conservation buffer of 2.5% without the BB Deferred Provisioning Facility could declare a total dividend of 15% with a maximum of 7.5% cash dividend.

Lenders who retain 12.5% ​​of the capital could declare a total of 12% in dividends with a maximum of 6% in cash dividends.

Those who can maintain a CAR of 11.875% to 12.5% ​​with the central bank deferral facility could declare a total of 10% dividend with a maximum of 5% cash dividend.

Banks could declare a maximum of 5% in stock dividends if they retain a minimum of 10.625% and a maximum of 11.875% of capital.

It’s not a good sign to move away from the central bank’s earlier decision, two chief executives of two private banks said on condition of anonymity.

A 30% dividend is sufficient for shareholders in this difficult time as the future is very uncertain as the COVID-19 pandemic has taken a new turn.

Today, the financial health of a good number of banks is not good and lenders must maintain a solid capital base during the difficult period created by the pandemic.

“If the lenders declare a good dividend, maybe the stock market will be buoyant for today but that will ensure that the market is not bad tomorrow,” said one of the CEOs.

At the meeting, the two regulators also agreed to ask the National Board of Revenue to rescind a notice that taxed dividends from publicly traded companies.

During the meeting, it was also decided that listed non-bank financial institutions, which were not entitled to pay more than 15% in cash dividends, will be able to pay additional dividends, according to a statement issued by the regulator. scholarship.

Bangladesh Bank will later clarify what percentage of bonus will be paid as dividend.

It was also decided that necessary measures will be taken to incentivize investment from the Tk 200 crore special fund of listed banks in the stock market, such as changing the relevant rules set out in a 2015 central bank circular.

In addition, it was also agreed to boost investments in fixed income securities such as Sukuk, corporate bonds, green bonds, etc.

The two regulators also agreed to ensure that all investors can transact treasury bills and bonds on the stock market.