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Tuesday, January 17, 2012 - 6.17 GMT

SEC further relaxes stock broker credit extension

 

The Securities and Exchange Commission (SEC) has decided to permit Stock Broking Firms to leverage 3 times adjusted Net Capital with immediate effect.

“Adjusted Net Capital” is the Net Capital computed as per the Colombo Stock Exchange (CSE) Member Regulations less 50% of Fixed Assets. In line with other regional markets, 50% was deducted to take into account the concerns of realizing illiquid assets into cash, says the SEC.

By permitting the Stock Broking Firms to leverage 3 times adjusted Net Capital, the additional credit available in the market will increase by Rs 5 billion resulting in the total credit available among Stock Broking Firms to Rs 8.7 billion, the SEC further said.

Having considered the dimensions of credit extension and to establish a balance between the two principals of lending norms and risk management the SEC reviewed the Credit Extension by Stock Broker Firms.

At present the Stock Broking Companies are permitted to extend credit based on the Liquid Assets of the company less obligations.




 



 

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Last modified: January 17, 2012.

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