The Bangladesh Securities and Exchange Commission (BSEC) has formally approached the finance ministry to intervene in addressing a longstanding negative equity crisis that continues to impede the country’s capital market growth.
As of October last year, negative equity tied to margin loans in the equity market amounted to Tk 105.2 billion. This figure includes Tk 78.6 billion in principal loans and Tk 26.6 billion in accumulated interest.
In stark contrast, intermediaries, including the Dhaka and Chittagong stock exchanges and merchant banks, have maintained provisions of only Tk 27 billion against these liabilities.
The problem traces its roots back to the 2010 stock market crash, when heavy disbursement of margin loans—often exceeding regulatory limits—fueled rapid market expansion before culminating in a sharp downturn.
The BSEC had intervened at the time to prevent a further collapse, barring forced sales from margin accounts. However, this also froze assets, leaving many investors with unrecoverable losses.
In a letter sent to the Financial Institutions Division (FID) under the Ministry of Finance, the BSEC outlined how the accumulated losses have remained unresolved despite several regulatory efforts and ongoing consultations. The regulator now seeks a joint meeting involving brokerage houses and merchant banks to find a viable path forward.
“The commission has requested support and guidance for a permanent solution to the growing negative equity in the market,” said a BSEC official, speaking on condition of anonymity.
The BSEC had previously instructed intermediaries to provision for these losses by 31 January this year. That deadline has passed without compliance. Industry groups, such as the DSE Brokers Association of Bangladesh, argue that regulatory actions, including the post-crash prohibition on forced selling and the imposition of a floor price mechanism, contributed to the problem.
“The commission must consider the historical context. Negative equity was worsened by interventions that halted sales in margin accounts,” said Saiful Islam, president of the brokers’ association. The association has proposed extending the provisioning deadline until 2030—the sixth such extension request since 2016. The BSEC has yet to respond.
