KATHMANDU, July 7: Banks are expected to start working as stock brokers soon as a task force under the parliamentary Finance Committee has given the green signal on the issue.
Amid the controversy whether banks should be provided with the brokerage license, the sub-committee formed under the parliamentary panel has recommended to allow banks to operate as brokerage firms. The sub-committee tasked with the responsibility of carrying out a study on the rationale of letting banks function in the stock exchange market submitted its report on Tuesday.
The development is also expected to end a year-long impasse on bringing new players in the stock exchange market. Last year, the parliamentary panel had asked the authority to put the issue on hold, following which the study team was formed. As of now, only 50 licensed firms have been allowed to work as brokerage companies.
Earlier, both the Securities Board of Nepal (Sebon) and Nepal Rastra Bank were looking for opening the brokerage license for banks. In December 2018, a team of experts led by Nepal Rastra Bank’s Deputy Governor Shiva Raj Shrestha had suggested that banks be allowed to establish subsidiary brokerage firms.
Initially, the rift between Nepal Stock Exchange (Nepse) and Sebon surfaced in a number of issues including the one related to licensing the banks for brokerage. Surprisingly, last July, Sebon and Nepse came to an agreement on the issue, following which Nepse had initiated a process for the purpose. Releasing the Working Procedure on Recommending License of Stock Broker to Subsidiary of Commercial Bank on August 2, 2019, Nepse had sought applications from eligible subsidiaries of commercial banks to apply for a license within 15 days.
However, the stockbrokers, opposing Sebon’s plan, pressurized the authority to backtrack on the issue and demanded to allow the existing brokerage firms to operate remote workstations at a number of locations outside the Kathmandu Valley.
Providing a brokerage license to banks is expected to increase access to investors to invest in shares. It is also expected to inject additional liquidity into the market to create extra demand for stocks.