|
|
This facility is generally
extended to companies or individuals on selective basis against pledge of tangible
securities such as Shares. Such financing is supportive to secondary Capital Market
concept. The facility is required to be adjusted periodically or within the period
as specified in the Sanction Advice/DAC. Given that Stock Market in Pakistan is
volatile, banks are required to refrain from extending loans to the market players
who are engaged in speculations for short term “Gains”, which quite often they fail
to make, consequently rendering the facility to non-performing ultimately.
POLICY
Advances against shares shall not be allowed to:
- Take exposure
against the security of shares/TFCs issued by them.
Provide unsecured credit to finance subscription towards floatation of share capital
and issue of TFCs.
Take exposure against the non listed TFCs or the shares of companies not listed
on the Stock Exchange(s).
Take exposure on any limited company against the shares/TFCs of that company or
its group companies.
Take exposure against sponsor director’s shares (issued in their own name or in
the name of their family members) of banks/DFIs.
Take exposure on any one person (whether singly or together with other family members
or companies owned and controlled by him or his family members) against shares of
any commercial bank/DFI in excess of 5% of paid up capital of the share issuing
bank/DFI.
Take exposure against the shares/TFCs of listed companies that are not members of
the Central Depository System.
Take exposure against unsecured TFCs or non rated TFCs or TFCs rated below ‘BBB’
or equivalent.
Unless otherwise adequately secured by other acceptable collaterals, Advance to
finance “Subscription”, towards floatation of “Share Capital” of public limited
company, is not allowed, under Credit Policy.
Advances approved shall be within “Per Party Limit” (i.e, 30% of un-impaired equity
of Bank for fund based and non fund based subject to condition that the maximum
outstanding against fund based exposure doest not exceed 20% of Bank’s equity) and
supported by positive CIB/DFIs confidential reports. Loans exceeding Rs. 500,000/-
(Total Accommodation) shall not be more than 10 times of Borrowers’ Equity i.e.
Capital and Reserves minus losses and 04 times in case of fund based facility, as
disclosed in their balance sheets.
Financing shall be allowed against shares registered in the name of “Borrower”,
however in case the shares tendered for pledge are registered in the name of a “Third
Party”, the letter of lien shall be signed by the Third Party and not by the Borrowers.
Advances Department Head or RCAD shall conduct a monthly review of financing against
shares and exercise vigilance over:-
- Market Rates of
pledged shares.
- Their marketability.
- Dividend/Bonus
declarations etc.
MINIMUM MARGIN REQUIREMENTS
1. Exposure against Shares of Listed Companies shall be subject to minimum margin
of 30% of their current market value as per prevalent Prudential Regulations, which
may at the discretion of the Bank be set higher. However, in terms of the Prudential
Regulations the Bank shall monitor the margin on at least weekly basis and shall
take appropriate action for top-up and sell out, on the basis of approved Credit
Policy and prior written authority from the borrower.
2. Exposure against TFCs rated “A” and above, by State Bank of Pakistan approved
Credit Rating Agency, shall be subject to a minimum margin of 10%, while the exposure
against TFCs rated “A-” and “BBB” shall be subject to a minimum margin of 20%.
|
|