NRB plans issuing broker licences to banksNepal Rastra Bank (NRB) has formed a committee to study the possibility of issuing stockbroker licences to commercial banks. The central bank seems to be agreeable to the idea, as the Banks and Financial Institutions Act (BAFIA) has not spoken about barring commercial banks from providing stock broking services.
Nepal Rastra Bank (NRB) has formed a committee to study the possibility of issuing stockbroker licences to commercial banks. The central bank seems to be agreeable to the idea, as the Banks and Financial Institutions Act (BAFIA) has not spoken about barring commercial banks from providing stock broking services.
The Securities Board of Nepal (Sebon) has long been seeking NRB’s approval to permit commercial banks to operate as stockbrokers.
Likewise, the Nepal Bankers’ Association has been urging the government to grant stockbroker licences to commercial banks. The umbrella organisation of commercial banks has put forward the view that banks would ensure the expansion of the business even in rural Nepal if these financial institutions are equipped with modern devices and human resources.
There are a total of 50 stockbrokers in the country. Recently, 41 remote work stations were set up in locations outside the Kathmandu Valley. These outlets, however, are still based in urban areas.
NRB seems to be flexible amid pressure from various players. NRB Spokesperson Narayan Prasad Poudel said the central bank had formed a committee to carry out a study for the purpose.
“The committee has been analysing whether Sebon’s regulation allowing banks to operate as stockbrokers is permissible under BAFIA,” Poudel said. There is no clear provision in the act that banks can be permitted to function as stockbrokers.
On the other hand, Sebon’s Securities Businessperson Regulations 2008 contains a provision allowing banks and financial institutions to offer brokerage services too.
“Banks or financial institutions established under the prevalent laws may conduct securities business as stockbroker, securities dealer and market maker through their respective fully owned subsidiary company,” states the Sebon regulation.
Based on this rule, Sebon has long been mulling to allow commercial banks to conduct stock trading, and had asked the Nepal Stock Exchange (Nepse) to carry out a study to explore such a possibility. However, Nepse said in its report submitted to Sebon a few months ago that the regulator of the securities market should coordinate with the central bank to enforce the provision. Stockbrokers said the need for additional brokerage firms should be established before issuing new permits. “NRB has been urging banks to merge in order to regulate the banking business more effectively, and the question arises whether they will be able to function successfully as stockbrokers, particularly in rural areas,” said Anjan Raj Poudel, managing director of Thrive Brokerage House. He suspected possible lobbying by vested interest groups to pressure the government to issue stockbroker licences to banks.