Asian Development Bank (ADB) is expected to give $250 million more to help continue capital market reforms of Bangladesh, officials said.
The proposed third capital market programme (CMDP-III) represents a continuation of previous works carried out.
“Negotiation for the fund is on and likely to be finalised by next month,” said an official of Economic Relations Division (ERD).
After the agreement for the CMDP-III, $80 million will be disbursed in the first installment and the remaining $170 million by December 2017.
Reforms planned under CMDP-III include increased liquid benchmark issues through introduction of floating rate notes, enhanced insurance industry participation in the capital market by issuing of investment guidelines by the Insurance Development and Regulatory Authority, improvements in the settlement and clearing system, as well as promotion of alternative financial instruments to develop a deeper and broader capital market, according to the ADB’s opinion.
ADB is set to continue its full support for ensuring a smooth transition in the development of capital markets reform process in line with the capital markets master plan and CMDP-II reforms.
Further structuring of the capital markets will require continuation of the technical approach adopted under CMDP-II and close collaboration with the coalition of stakeholders to crucially maintain the momentum of reforms.
Reform initiatives under CMDP-II under which ADB provided $300 million were successfully implemented and completed by the end of 2014.
Demutualisation of the stock exchanges in Dhaka and Chittagong was one of the achievements of reform initiatives.
Other achievements include amendment to the SEC Act in November 2012 that paved the way for BSEC to have unhindered access to its own BSEC Fund, operationalisation of a real-time market surveillance system that helps BSEC to detect trading irregularities and enhancement of BSEC’s enforcement capacity through creation of a capital market tribunal in January 2014 that can expedite resolution of security cases pending in Bangladesh’s court system.
The capital market in Bangladesh has had its share of stock market booms and busts. Following a bull run in 2010, the Dhaka Stock Exchange (DSE) crashed in December 2010, and by March 2011, the index had fallen by half from its all-time high, wiping out large share value gains.
“The crash resulted in bankruptcies, loss of employment and disruption to the economy. It also underscored the vulnerability of Bangladesh’s capital markets and confirmed the pressing need for reforms,” said the ADB.
The government embarked on a programme of meaningful reforms and was partnered by the ADB under the CMDP-II in November 2012.