Banks can work as stockbrokers through subsidiaries after acquiring licenses from Sebon
KATHMANDU, Dec 29: Three commercial banks have sought permission from the Nepal Rastra Bank (NRB) for opening the subsidiary company to work as a stockbroker.
Sanima Bank Ltd, NIC Asia Bank Ltd, and Citizens Bank International Ltd have applied for the permission of the central bank to set up their subsidiary companies for securities trading.
Govinda Prasad Nagila, deputy spokesperson at the NRB, told Republica that these commercial banks have sought the central bank’s nod to begin the process of setting up subsidiary for providing securities business services.
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These banks have approached the NRB for its approval, after the central bank announced in its Monetary Policy for the current Fiscal Year 2018/19 that it will introduce a provision for the commercial banks to work as stock broker.
“Sanima Bank has sought the preliminary approval of the NRB to work as stockbroker. Once the central bank gives us permission, we will work toward setting up subsidiary company to provide brokerage service for securities business,” said Bhuvan Dahal, CEO of Sanima Bank.
While the NRB issued the circular only on Wednesday that paved the way for commercial banks to work as stockbroker through subsidiary, these banks had reached out to the central bank before the circular was issued.
In its circular, the NRB has said that a commercial bank can make investment in a subsidiary company with minimum 51 percent ownership to provide securities businesses. However, such subsidiary company should also acquire license from the Securities Board of Nepal (Sebon) to work as securities businessperson which is commonly known as stock brokerage firm.
Currently, there are only 50 securities brokerage firms which have acquired license from the Sebon to work as stockbrokers. Though providing broker license to bank subsidiary was one of the top agenda of Sebon’s Chairman Rewat Bahadur Karki, the plan had not materialized yet due to lack of legal apparatus.
The central bank, however, has barred such subsidiary company from trading securities of its parent company.
These subsidiaries will not be allowed to provide all securities business services, according to Sebon officials.
“They will be allowed only to execute the trading order of securities of their clients as stockbroker. They cannot provide other securities business services like investment management, dealership, consultancy services as have been understood by many,” said Niraj Giri, executive director at the Sebon.
According to Giri, any bank who wants to work as stock broker should first set up subsidiary and acquire the permission from Nepal Stock Exchange Company Ltd before applying the license with the Sebon.
Stockbroker license to commercial banks is expected to expand the share and other securities trading services outside Kathmandu valley due to their presence across the country.
