BB favours bond issued by stock market intermediaries to increase liquidity

October 26, 2020 09:50:14

| Updated:

October 26, 2020 09:54:22

The central bank has suggested that the securities regulator allow stock market intermediaries to issue bonds for improving the inflow of liquidity in the country’s capital market.

The suggestion came at an informal meeting with the high-ups of Bangladesh Securities and Exchange Commission (BSEC) held at the Bangladesh Bank (BB) headquarters in Dhaka on Sunday.

A three-member delegation of the BSEC, led by its chairman Shibli Rubayat-Ul-Islam, informed BB Governor Fazle Kabir of the latest development in the capital market, according to officials.

The meeting also discussed various issues regarding further development of the market, particularly the way to ensure more liquidity for the market intermediaries, solutions for the negative equity and expediting transaction of bonds.

The BSEC will arrange several meetings with the stakeholders regarding the issues where the central bank officials will also be invited to take part in discussions.

At the meeting, the BB said that there was scope to improve the liquidity situation of the market intermediaries if the BSEC allowed them to issue bonds by solving the negative equity issue of the business entities.

Under the existing policy of BSEC, brokerage houses or merchant banks were not allowed to issue bonds.

The central bank also expressed its positive views about formation of a special fund for the capital market operators having negative equity created due to disbursement of margin loans.

The BB in the meeting told the top officials of the securities regulator to go ahead with a detailed plan on formation of the special fund.

“The BB was very much positive about our proposal regarding formation of a fund for the market operators having negative equities,” said Dr. Shaikh Shamsuddin Ahmed, a commissioner of the BSEC.

Mr. Ahmed said the proposal for thy special fund would have to be made taking into account the extent of negative equity.

“The BB is very much positive about our capital. They told us to go ahead with the proposal. We will finalise the proposal sitting with the BB officials,” Mr. Ahmed told the FE.

He said the objective of disbursing funds at lower interest rates to market operators is to enhance the liquidity support in the capital market.

In Sunday’s meeting, the BSEC also discussed some technical issues regarding opening foreign digital trading outlets.

“There is no problem with3 allowing stock brokers to open foreign outlets,” the BSEC commissioner said.

He also said both the BSEC and the BB also discussed some ambiguities in corporate governance codes enacted by the securities regulator.

“Actually, there is no gap between our corporate governance codes and rules of the central bank,” the BSEC commissioner added.



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