SEBON suggests NRB to include new provision for converting promoter shares of BFIs; also suggests restructuring of NEPSE for benefit of capital market

Securities Board of Nepal (SEBON) has provided the central bank with various suggestions for the benefit of capital market to be included in the upcoming monetary policy of Nepal for FY 2074/75. The Board has suggested Nepal Rastra Bank (NRB) for reforms in stock exchange, to prioritize productive sector, margin lending, conversion of promoter shares and various other reforms for equity market. In a press statement, SEBON has suggested NRB to formulate new provision for the conversion of promoter shares of Banks and Financial Institutions (BFIs) to ordinary shares. As per the existing provision in Banks and Financial Institutions Act 2073, all promoter shares of BFIs can be converted to ordinary shares after 10 years of establishment. SEBON argues that this conversion of promoter shares to ordinary shares at once can greatly affect the price and create instability, due to which a provision should be made to convert the shares in a gradual step-by-step and percentage-wise basis. The Board has also asked NRB to include provision for changing share structure of Nepal Stock Exchange Limited (NEPSE). As per the existing provision of Stock Exchange Operation Regulation 2064, the Board has suggested NRB to sell shares of NEPSE to suitable and exceptional companies listed in NEPSE. With this restructuring, SEBON says that NEPSE will be able to stand out and compete as an international-level stock exchange company. Other suggestions provided by SEBON include necessary coordination between the Board and the central bank to increase supervision to make ASBA system more competitive and effective. Likewise, SEBON has also called for coordination between the two regulators to set new provision to allow margin lending directly through brokerage companies, and for similar coordination while setting up swap ratio for mergers and acquisitions. The press statement issued by SEBON, however, has not suggested NRB for issuing brokerage license to commercial banks. Full Press Release: