The Bangladesh Securities and Exchange Commission (BSEC) has introduced major changes to the country’s margin loan regulations, including a new provision allowing lenders to sell securities without prior notice if an investor’s portfolio equity falls below 25%.

Under the revised rules, the maximum price-to-earnings (P/E) ratio for margin-eligible shares in sectors other than life insurance has been raised from 30 to 40. The final draft was approved by the BSEC and sent to the Bangladesh Government Press for gazette publication.

The revised rules set the margin loan ratio for general securities at 1:1, meaning investors can borrow an amount equivalent to their own equity.

For banks, non-life insurers and other sectors, a maximum P/E ratio of 40 will apply. For life insurance companies, the price-to-book (P/B) ratio will remain the applicable benchmark.

For the first time, the regulations will use trailing P/E ratios, calculated based on a company’s current market price and earnings per share (EPS) over the previous 12 months. The ratio will be updated when new quarterly financial statements are published.

The rules also revise margin call and forced-sale thresholds. A lender must issue a margin call when an investor’s portfolio equity falls below 50%. If equity subsequently falls below 25%, the lender may sell securities without issuing any prior notice.

The final thresholds are more relaxed than those proposed in the initial draft, which had set margin calls at 70% equity and forced sales at 50%.

Margin loans will not be available for shares classified as ‘Z’, ‘N’ or ‘G’. Securities listed on the SME Board, Alternative Trading Board (ATB) and Over-the-Counter (OTC) market will also remain excluded.

Only ‘A’ and ‘B’ category shares listed on the main market of stock exchanges will be eligible for margin financing under the revised regulations.