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Do these kinds of things go under existing margin trading 5% limit

2 posters

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duke


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Do following things go under margin trading 5% of bank loans limit or are they usually personal loans, overdrafts, some other name approved by the bank managers and I assume they don't pay the same interest rate as "official margin trader" margin traders do. How large do you think these type of "unofficial" credit is in the market? (This is an very old article even before new rules. But there was a news article that this is happening.)


‘When I wanted Rs 60 million from Seylan Bank to invest in NDB and Royal Ceramic shares last year, Kotelawala offered me Rs 240 million-a four fold increase,’ he said. And this year, when I wanted Rs 50 million from Sampath Bank, they offered me Rs 150 million instead, added Perera.

He invested in NDB by buying those shares at prices ranging from between Rs 20-60 a share. At present those shares command a price of Rs 90 a share. He further said that virtually all of his investments were providing him with a return higher than the interest charged by the banks on his loans. ‘I have no foreign partners. All of these monies required for my investments have been generated locally,’ he says. Perera attributes his success to hard work.
( http://www.island.lk/2002/12/17/busine01.html )

PGCR


Equity Analytic
Equity Analytic

Based on the Banking Act Directions No 04 of 2011 each & every commercial bank in the country has to report to Central bank about its exposure to stock market every Quarter.
In what ever format if com bank has granted any loan ( margin loan, working capital loan, or any other...) against listed shares( by keeping listed shares as securities) it has to be reported to central Bank each and every Quarter.
That exposure should be less than 5% of total loans and advances of the bank.
The above mentioned loans also now counting under this 5% rule though they are not margin trading loans.

Hope you got wt u want...

duke


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

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.

( http://sundaytimes.lk/110522/BusinessTimes/bt06.html )

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