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Build long term trust in our financial markets

  • Published at 06:49 pm November 28th, 2013
Build long term trust in our financial markets

Speaking at the foundation stone ceremony of the new Bangladesh Securities and Exchange Commission building earlier this week, the prime minister supported measures to build trust in the financial markets and to alert investors to risks.

The governor of the Bangladesh Bank has also spoken on how confidence in the stock market has been undermined by past scandals such as those involving the Hall-mark and Bismillah groups.

Ad-hoc measures alone are not sufficient to deter those who wish to bend the rules or to attract higher levels of long-term institutional investors into providing capital for Bangladeshi companies. Unless the authorities fulfil their promise of holding to account those responsible, many prudent investors may choose to continue to avoid the stock market.

The authorities have announced a 10 year plan to build confidence and develop the capital markets. These include sensible steps to plug gaps in the system by limiting the level of risk that banks can take to invest in the stock market directly and through loans. It also includes moves to improve transparency so that all investors, large and small, have full access to price sensitive information and that rules are properly enforced.

Whether the establishment of a tribunal to speed up cases relating to the capital market can help achieve these goals remains to be seen. As with other problems, defects in the system are down more to the ineffective implementation of rules, not the lack of regulations.

Investors need independent assurance that the market is fully accountable and transparent.