‘Inclusive capital market reforms’ in offing

December 28, 2014

ADB to lend $250m for the programme
The government plans to embark on an ‘inclusive capital market reform programme’ with participation of pension and provident funds and introduction of Islamic bonds to energise the ailing stock business. Six broad areas of policy interventions are the salient features in the planned reforms under an ADB-financed programme, a senior finance ministry official said. The ministry officials appeared optimistic about the planned reforms as two similar programmes of ADB brought about significant development in the capital market.
The programme is expected to kick-start from the beginning of next year. A processing mission of Asian Development Bank after a week-long visit to Bangladesh this month hinted to lend US$ 250 million for the programme called ‘Third capital market development programme’.
‘We have given the go-ahead to ADB, and primarily agreed to implement the policy interventions and bring about reforms in the capital market so that a lasting sustainability exists in the stock business,’ a finance official told New Age.
The project is aimed at making sure that the capital market is more effective in mobilising resources to support the economy’s financing requirements to promote growth and development, he added.
The ADB-prescribed reforms were agreed by the regulators including finance ministry, Bangladesh Bank, and Securities and Exchange Commission during a series of meetings with the ADB mission early this month, officials concerned said.
A formal loan agreement for US$ 250 million would be signed soon to this effect, they said.
The areas of reforms to be implemented are : introducing corporate bond market, catalyzing institutional investors’ demand, pension and provident fund participation in stock business, strengthening the insurance sector, promoting Islamic bond market development and encourage ‘Sukuk’ issuance, promoting private equity fund participation and mutual fund activity in the capital market and establishing a clearing house to promote development of derivatives.
Officials concerned at the SEC and finance ministry said the proposed reforms, if brought in the policy perspective, would give the capital market a firm platform to stabilise the market and entice institutional and portfolio investors.
They said they had been relentlessly working to strengthen the market through participation of pension and provident fund, but faced hindrance as some vested quarters oppose the move.
‘Once we will pursue the issue under a programme which involves huge lenders’ money, things will become easy to go through,’ a high official at the finance ministry said.
Under the previous two ADB-sponsored development programme, the government established a special capital market tribunal and a state-of-the-art surveillance system at the SEC, capped the commercial banks’ total direct and indirect exposure to the stock business and brought changes in the margin loan regulation.
The amendments to Bank Companies Act, SEC Act 1993 and Insurance Act were also made under two previous programmes of the ADB, sources said.

-With New Age input

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