Kathmandu. The Securities and Exchange Board of Nepal has increased the underwriting limit of merchant banks.
The meeting of the Board of Directors of the Securities and Exchange Board of Nepal has decided to increase the maximum limit of securities underwriting through subsidiaries of banks, financial institutions and insurance companies, informed spokesperson Niranjay Ghimire. ‘Currently, there is a provision that merchant banks are allowed to underwrite only securities worth up to 3 times their net worth,’ Ghimire said. ‘While keeping that provision intact, subsidiaries of banks, financial institutions and insurance companies have now been allowed to underwrite up to the net worth of the parent company. However, for this, a provision has been made to ensure that the parent company bears the liability.’
(c) of Schedule 9 of the Securities Dealers (Merchant Bankers) Regulations, 2064, it is provided that the underwriter (guarantor) can underwrite up to 3 times the last audited net worth and the investment manager can manage investments up to 15 times the last audited net worth.
After the decision of the Securities and Exchange Board of Nepal on Chaitra 7, a provision has been added to the said schedule, ‘However, in cases where a contractual agreement has been signed between a subsidiary company of a bank and financial institution or insurance company and the parent company of such company to assume the liability, underwriting can be done in a manner that does not increase the net worth as per the latest audited financial statement of the parent company.’
