Bangladesh’s securities regulator has proposed allowing brokerage houses and merchant banks to lend up to five times their net capital against share purchases, sharply raising the current three-times limit in a draft rule change that also tightens client eligibility and forced-sale triggers.

The draft amendments to the Bangladesh Securities and Exchange Commission (Margin) Rules, 2025 were published on July 19 and are open for stakeholder comments. According to the draft, the changes would increase the liquidity and lending capacity of registered stockbrokers and full-service merchant banks while revising margin requirements and lending conditions.

Under the proposed framework, margin financiers would be permitted to extend loans up to five times net capital or net worth, whichever is higher, compared with the existing ceiling of three times.

The draft also proposes stricter margin maintenance and forced-sale requirements. Clients would be required to maintain equity of at least 70 percent of the margin loan at all times. If the ratio slips below that threshold, the financier must issue a margin call and the borrower has three working days to restore cover. Failure would block new lending, while the financier could sell securities to adjust the account.

If equity falls below 50 percent of the margin loan, the financier would have the right to execute a forced sale of shares without prior notice. The draft stipulates that losses arising from any delay in executing a forced sale due to market conditions would not be borne by the lender.

Access to margin loans would also be restricted. Investors would need a minimum of BDT 300,000 of their own money in listed securities to qualify. For ordinary companies, margin loans would be barred if the trailing price-to-earnings ratio exceeds 30 or earnings per share are negative. Banks, financial institutions and service-sector stocks would face a maximum price-to-book ratio of 3, while insurance companies would be capped at 1. Margin lending against securities in the main board’s N and Z categories, as well as those on the SME, ATB and OTC platforms, would be prohibited entirely.

The draft raises the single-security exposure limit for margin financiers to 20 percent of total margin loans, from 15 percent in the original rules, though no more than 20 percent of a single client’s loan may be concentrated in one security.

All margin financiers would be required to form a risk management committee with at least two members, meeting at least quarterly and reporting to the board. The draft also bars linking the compensation of research staff directly to brokerage trading commission income. Margin agreements would be set for one year but would auto-renew unless either party gives written notice of cancellation.

The draft has been released for stakeholder comments, suggestions and objections over the next two weeks.