Margin Loan Criteria: A Comparative Analysis with Well-Regulated Financial Markets and Reform Opportunities in Bangladesh

Abstract

Background: The previous Margin Rule in Bangladesh had several shortcomings, including weak investor protection, unclear guidelines, insufficient restrictions, and poor risk management. This resulted in high negative equity, which harmed the financial market and impacted the overall economy as well. Although the newly published Margin Rule 2025 is an improved version, there is scope for further improvement that can contribute significantly to restore the economic condition of Bangladesh.

Purpose and Significance: The study analyzes the existing margin loan policy in Bangladesh and draws on margin lending practices from well-functioning financial markets (the United States, Australia, Canada, and Vietnam), along with current practices in Bangladeshi brokerage firms with zero negative equity and insights from industry experts. It proposes policy-level recommendations for the Bangladesh Securities and Exchange Commission (BSEC) and reform measures for margin financers to address key risk areas. These recommendations aim to support a more stable and effective margin lending framework in Bangladesh.

Methodology: This qualitative research incorporates comparative secondary data analysis and thematic analysis of expert interviews to evaluate Bangladesh’s margin loan rules and recommend reforms based on expert opinions and global best practices.

Findings: The report recommends stricter BSEC licensing, clearer and more effective margin rules, and including margin loans in CIB reports to improve accountability and transparency. It also suggests that margin lenders use credit ratings and stock risk profiles based on key factors to set fair, adjustable margin requirements to help keep the stock market healthy.

Research Limitations/Implications: Future researchers can conduct additional expert interviews and adjust the rules by considering differences in the stock markets, economic conditions, and other macroeconomic factors across countries to recommend more suitable margin rules.

Practical Implications: A suitable margin rule can reduce the chances of negative equity, encourage greater investment, make the stock market more liquid and healthier, and protect the rights of both investors and margin loan lenders.

Originality/Value: This report offers guidance for regulators and brokers to create healthier, more sustainable margin lending policies.

Keywords: Margin rules, Stock market regulation, Investor protection, Risk management, Negative equity prevention, Bangladesh stock market

DOI: 10.7176/EJBM/18-3-04

Publication date: March 28^th 2026