29065718 Financial System in Bangladesh

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STRUCTUREOFFINANCIALSYSTEMINBANGLADESH

INTERNATIONALISLAMICUNIVERSITYCHITTAGONG

AssignmentOnISLAMICFINANCIALSYSTEMTopic:StructureofFinancialSysteminBangladeshSubmittedTo:MR.ABDULLAHILMAMUNLECTURERDEPARTMENTOFBUSINESSADMINISTRATIONINTERNATIONALISLAMICUNIVERSITYCHITTAGONG.

SubmittedBy:MUHAMMADSHAHINUREKRAMCHOWDHURYIDNo:R093117

RMBA,4thTrimester,Section(B).

SubmittedDate:

22February,2010.

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FinancialSystem:

Thefinancialsystemisasetoforganizedinstitutionalset-upthroughwhichsurplusunitstransfertheirfundstodeficitunits.Defineafinancialsystemfairnarrowly,toconsistofasetofmarkets,individualsandinstitutions,whichtradeinthosemarketsandthesupervisorybodiesresponsiblefortheirregulation.Theend-usersofthesystemarepeopleandfirmswhosedesireistolendandtoborrow.Afinancialsystemisasystemthattochannelsfundsfromlenderstoborrowers,tocreatesliquidityandmoney,toprovidesapaymentsmechanism,toprovidesfinancialservicessuchasinsurance&pensionsandtooffersportfolioadjustmentfacilities.InFinance,thefinancialsystemisthesystemthatallowsthetransferofmoneybetweensaversandborrowers.Itcomprisesasetofcomplexandcloselyinterconnectedfinancialinstitutions,markets,instruments,services,practicesandtransactions.Aneconomysfinancialsystemexiststoorganizethesettlementofpayments,toraiseandallocatefinanceandtomanagetherisksassociatedwithfinancingandexchange.So,thegovernmentsectorandthecorporatesectoraretheusersoffinancialsurplusofhouseholdsectorandthatthefinancialsectorperformsthisvitalfunctionofintermediation.Empiricalevidenceshowsthatthegrowthoffinancialmarketsanddevelopmentoftheeconomyarecomplementarytoeachother.Adevelopedfinancialsystemisonethathasasecureandefficientpaymentsystem,securitymarketandfinancialintermediariesthatarrangefinancingandderivativemarkets&financialinstitutionstha

tprovideaccesstoriskmanagementinstruments.Thus,Afinancialsystemconsistsofasetoforganizedmarketsandinstitutionstogetherwithregulatorsofthosemarketsandinstitutions.Theirmainfunctionistochannelfundsbetweenendusersofthesystem:fromlenders(surplusunits)toborrowers(deficitunits).Iaddition,afinancialsystemprovidespaymentsfacilities,avarietyofservicessuchasinsurance,pensionsandforeignexchange,togetherwithfacilities,whichallowpeopletoadjusttheirexistingwealthportfolios.2


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BackgroundoffinancialsysteminBangladesh:ThefinancialsysteminBangladeshincludesBangladeshBank(theCentralBank),scheduledbanks,non-bankfinancialinstitutions,Microfinanceinstitutions(MFIs),insurancecompanies,co-operativebanks,creditratingagenciesandstockexchange.Amongscheduledbanksthereare4Nationalisedcommercialbanks(NCBs),5stateownedspecializedbanks(SBs),30domesticprivatecommercialbanks(PCBs),9foreigncommercialbanks(FCBs)and29non-bankfinancialinstitutions(NBFIs)asofDecember2006afterthattotalnumberofinstitutionsareincreasingrapidly.However,RupaliBank,anNCBisbeingsoldtoaforeignbuyer,andoncethistransactioniscompleted,thecountrywillhaveonly3NCBs.,whicharebeingcorporative.Overandabovetheinstitutionscitedabove,threedevelopmentfinancialinstitutionsnamelyHouseBuildingFinanceCorporation(HBFC),Ansar-VDPUnnayanBankandKarmaShangsthanBankareoperatinginBangladesh,allofwhicharestateowned.ThefinancialsystemofBangladeshismainlybankdependent.Thoughintherecentyears,anumberofnon-bankingfinancialinstitutions(leasingandmerchantbanks)havebeenestablished,yetthebankingsectorstillcapturesthelionshareofthefinancialmarket.

FinancialSectorsinBangladesh:BangladeshBankisthekeyplayerforthefinancialsectorofBangladeshaswellasfortheeconomy.BangladeshBankisthebankertothegovernmentaswellastootherbanks.Itformulatesandimplementsmonetarypolicy,managesforeignex

changereserveandistheauthoritytosuperviseandregulateotherbanksandnon-bankfinancialinstitutions.ThefinancialsectorofBangladeshhasgonethroughalotofreformsinthepasttwodecadesandcentralbankreformwasakeyelementofthereformagenda.Thisstudymapsthevariousreformsthathavetakenplacesofar.BangladeshBankhasimprovedincertainareasandyetthereareavenueswheremorecanbedone.Thebankplaysadualroleintheeconomy.BangladeshBanksupervisesandregulatesthecountrysbankingsectorwhereithassignificantimprovements.Ontheotherhand,thebankunderachievesintermsofautonomousformulationandimplementationofmonetarypolicyincoordinationwiththegovernment.

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StructureofFinancialSystem:TheMainConstituentsofOurCountriesFinancialSystemAre:01.FinancialInstitutions/Intermediaries.02.FinancialInstruments.03.FinancialMarkets.

StructureofFinancialSystem

01-(i).Banks:a)b)c)d)PrivateCommercialBanksPublicCommercialBanksPrivateForeignCommercialBanksSpecializedFinancialInstitutions

01-(ii).Non-BankFinancialInstitutions:a)b)c)d)e)f)InsuranceCompaniesSecurityFirmsInvestmentBanksFinancialCompaniesMutualFundsPensionFunds

01.

FinancialInstitutions

02-(i).MoneyMarketInstruments:a)TreasureBillsCommercialPaperNegotiableCertificateofdepositsd)BankerAcceptances

02-(ii).CapitalMarketInstruments:a)b)c)d)e)f)BondsStocksGovt.SecuritiesBank&ConsumerCommercialPaperDebenturesMortgages

02.

FinancialInstruments

b)c)

03-(i).

PrimaryMarketSecondaryMarket

03.

FinancialMarkets

03-(ii).

03-(iii).MoneyMarket03-(iv).CapitalMarket

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01.FinancialInstitutions/Intermediaries:Anorganizationwhichborrowsfundsfromlendersandlendsthemtoborrowersontermswhicharebetterforbothpartiesthaniftheydealtdirectlywitheachother.Financialinstitutionsasintermediaries:Asageneralrule,financialinstitutionsareallengagedtosomedegreeinwhatiscalledintermediation.Ratherobviouslyintermediationmeansactingasago-betweenfortwoparties.Thepartieshereareusuallycalledlendersandborrowersorsometimes-surplussectorsorunits,anddeficitsectorsorunits.Asageneralrule,whatfinancialintermediariesdois:tocreateassetsforsaversandliabilitiesforborrowerswhicharemoreattractivetoeachthanwouldbethecaseifthepartieshadtodealwitheachotherdirectly.Therearetwogeneralconsequencesoffinancialintermediation.Thefirstisthattherewillexistmorefinancialassetsandliabilitiesthanwouldbethecaseifthecommunityweretorelyupondirectlending.Thesecondgeneralconsequenceoftheinterventionoffinancialinstitutionsisthatlendingandborrowinghavebecomeeasier.Itisnownolongernecessaryforsaverstosearchoutborrowerswithmatchingneeds.Inthissensefinancialintermediarieshaveloweredthetransactioncostsoflendingandborrowing.

01-(i).Banks:Bankingisessentiallybasedonthedebtor-creditorrelationshipbetweenthedepositorsandthebankontheonehandandbetweentheborrowersandthebankontheother.Interestisconsideredtobethepriceofcredit,reflectingtheoppor

tunitycostofmoney.ThecommercialbankingsystemdominatesBangladesh sfinancialsector.BangladeshBankistheCentralBankofBangladeshandthechiefregulatoryauthorityinthesector.ThebankingsystemiscomposedoffourPubliccommercialbanks,fivespecializeddevelopmentbanks,thirtyprivatecommercialBanksandnineforeigncommercialbanks.Outof6562scheduledbankbranchesoperatinginthecountry,uptoendDecember2006theNCBsoperate3384branches,ofwhich2146areinruralareasand1238areinurbanareas;SBshave1354branchesofwhich1200areinruralareasand154areinurbanareas;PCBshave1776branchesofwhich488areinruralareasand1288areinurbanareas;andFCBshave48branchesexclusivelyinurbanareas.Outof30PCBs,sixhavebeenoperatingasIslamicbanks.Aftertheyear2006thattotalnumberofbranchesareincreasingrapidlyupto2009.ListofAlltypesofbankingsectorsare:CentralBankPrivateCommercialBanksPublicCommercialBanksForeignCommercialBanksSpec

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a)PrivateCommercialBanks:Evenwithalltheprovisionsathand,duringtheinterviewsmanyexpertsopinedthattherecouldbeseparateagenciestoregulateandsupervisetheprivatesectorbankingactivitiesinBangladesh.Anumberofagenciescanbesetupandeachwouldlookintoanumberaspectsrelatedtoprivatesectorbanking.Underthecurrentsystem,thecommercialbanksandfinancialinstitutionshavetoreporttoandaretoacertainextentsupervisedbytheSecuritiesandExchangeCommission,whentheyregisterwiththestockexchange.Privatebanksarethehighestgrowthsectorduetothedismalperformancesofgovernmentbanks(above).Theytendtoofferbetterserviceandproducts.ABBankLtdAzizCo-opCommerce&FinanceBankLtd.BRACBankLimitedEasternBankLimitedEasternBankLimitedSocialInvestmentBankLimitedDutchBanglaBankLimitedUttaraBankLimitedDhakaBankLimitedIslamiBankBangladeshLtdPubaliBankLimitedUttaraBankLimitedIFICBankLimitedNationalBankLimitedUnitedCommerciaBankLimitedNCCBankLimitedPrimeBankLimitedSouthEastBankLimitedAl-AraahIslamiBankLimitedSocialIslamiBankLimitedStandardBankLimitedOneBankLimitedEximBankLimitedMercantileBankLimitedBangladeshCommerceBankLimitedMutualTrustBankLimitedFirstSecurityIslamiBankLimitedThePremierBankLimitedBankAsiaLimitedTrustBankLimitedShahjalalIslamiBankLimitedJaunaBankLimitedICBIslamiBankMoonBankLimitedUnitedCommercialBankLimited6


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b)PublicCommercialBanks:TheBaselCommitteeonBankingSupervisionpublishedguidancein1999toassistbankingsupervisorsinpromotingtheadoptionofsoundcorporategovernancepracticesbybankingorganizationsintheircountries.ThisguidancedrewfromprinciplesofcorporategovernancethatwerepublishedearlierthatyearbytheOrganizationforEconomicCo-operationandDevelopment(OECD)withthepurposeofassistinggovernmentsintheireffortstoevaluateandimprovetheirframeworksforcorporategovernanceandtoprovideguidanceforfinancialmarketregulatorsandparticipantsinfinancialmarketsatpubliccommercialbanks.SonaliBankLimitedJanataBankLimitedAgraniBankLimitedRupaliankLimited

c)PrivateForeignCommercialBanks:Thestateandnatureofcorporategovernancehasbeenstudiedunderfivegeneralheadings.Threetypesofforeigncommercialbanksorcompanieswerestudied:a)thepubliccorporations-thesearemainlyprivateutilitycompaniesoperatedbythegovernmentwithaboardofdirectorconsistingofthepeopleofBangladeshandfewexperts,b)financialinstitutionslikebankswhicharelistedintheDhakaStockExchangebutrelatedwithgovernmentalconditionaboutsharedistributionandc)non-financiallimitedcompaniesalsolistedinthestockexchangesinthecountrybutrelatedwithgovernmentalconditionaboutsharedistribution.CitibankHSBCStandardCharteredBankCommrcialBankofCeylonStateBankofIndiaHabibBankNationalBankofPakistanBnkAlfalahd)SpecializedFinancialInstitutions:Outofthespecializedbanks,

two(BangladeshKrishiBankandRajshahiKrishiUnnayanBank)werecreatedtomeetthecreditneedsoftheagriculturalsectorwhiletheothertwo(BangladeshShilpaBank(BSB)&BangladeshShilpaRinSangtha(BSRS)areforextendingtermloanstotheindustrialsector.TheSpecializedbanksare:GrameenBankBangladeshKrishiBankBangladeshDevelopmentBankLtdRajshahiKrishiUnnayanBankBasicBankLtd(BankofSmallIndustriesandCommerce)BangladeshSomobayBankLimited(CooperativeBank)AnsarVDPUnnyanBank

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01-(ii).Non-BankFinancialInstitutions:Non-BankFinancialInstitutions(NBFIs)areanimportantpartoffinancialsysteminBangladesh.NBFIsoperationsareregulatedundertheFinancialInstitutionsAct,1993.TheNBFIsconsistofinvestment,finance,leasingcompaniesetc.Therewere29financialinstitutionsoperatinginBangladeshasof31December2006.Oftheseoneisgovernmentowned,15arelocal(private)andtheother13areestablishedunderjointventurewithforeignparticipation.BangladeshBankhasintroducedapolicyforloanandleaseclassificationandprovisioningforNBFIsfromDecember2000onahalf-yearlybasis.Amongthe29financialinstitutions,12havebeenlistedinthestockexchangesupto31December2006tostrengthenfinancialcapabilityandtherestareunderprocesstobelistedinduecourseaftertheyear2006thatthetotalnumberofinstitutionsareincreasingrapidly.ProductsandServicesOfferedbyNBFIsNon-BankFinancialInstitutionsplayakeyroleinfulfillingthegapoffinancialservicesthatarenotgenerallyprovidedbythebankingsector.ThecompetitionamongNBFIsisincreasingovertheyears,whichisforcingthemtodiversifytoawiderrangeofproductsandservicesandtoprovideinnovativeinvestmentsolutions.NBFIsappeartoofferflexibleoptionsandhighlycompetitiveproductstohelpcustomersmeettheiroperationalandfinancialgoals.ThetablebelowprovidesasummaryoftheproductrangeofferedbyexistingNBFIsofBangladesh.DifferentProductsandServicesofNBFIs

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a)InsuranceCompaniesTheinsurancesectorisregulatedbytheInsuranceAct,1938withregulatoryoversightprovidedbytheControllerofInsuranceonauthorityundertheMinistryofCommerce.AseparateInsuranceRegulatoryAuthorityisbeingestablished.Atotalof62insurancecompanieshavebeenoperatinginBangladesh,ofwhich19providelifeinsuranceand43areinthegeneralinsurancefield.Amongthelifeinsurancecompanies,exceptthestate-ownedJibanBimaCorporation(GBC)foreignownedAmericanLifeInsuranceCompany(ALlCO),andtherestoftheprivate.Amongthegeneralinsurancecompanies,state-ownedShadharanBimaCorporation(SBC)isthemostactiveintheinsurancesector.Atotalof31insurancecompaniesarelistedinthecapitalmarket,ofwhich8offerlifeinsurances.

i)LifeInsuranceCompany(Public)JibanBimaCorporationii)LifeInsuranceCompany(Foreign)AmericanLifeInsuranceCo.iii)LifeInsuranceCompany(Private)ProgressiveLifeInsuranceCo.Ltd.NationalLifeInsuranceCo.Ltd.RupaliLifeInsuranceCo.Ltd.DeltaLifeInsuranceCo.Ltd.FareastIslamiLifeInsuranceCo.Ltd.SunLifeInsuranceCo.Ltd.HomelandLifeInsuranceCo.Ltd.MeghnaLifeInsuranceCo.Ltd.PadmaIslamiLifeInsuranceCo.Ltd.SandhaniLifeInsuranceCo.Ltd.SunflowerLifeInsuranceCo.Ltd.BairaLifeInsuranceCo.Ltd.GoldenLifeInsuranceCo.Ltd.ProgotiLifeInsuranceCo.Ltd.PrimeLifeInsuranceCo.Ltd.PopularLifeInsuranceCo.Ltd.11


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iv)GeneralInsuranceCompany(Public)SadharanBimaCorporationv)GeneralInsuranceCompany(Private)AgraniInsuranceCompanyLimited.BangladeshCo-operativeGeneralInsuranceLtd.BangladeshGeneralInsuranceCo.Ltd.BangladeshNationalInsuranceCo.Ltd.CentralInsuranceCo.Ltd.CityGeneralInsuranceCo.LtdEasternInsuranceCo.LtdEastlandInsuranceCo.LtdFederalInsuranceCo.LtdGreenDeltaInsuranceCo.LtdJanataInsuranceCo.LtdKarnafullyInsuranceCo.LtdMeghnaInsuranceCo.LtdMercantileInsuranceCo.LtdNorthernGeneralInsuranceCo.LtdPeople sInsuranceCo.LtdPhoenixInsuranceCo.LtdPioneerInsuranceCo.LtdPrimeInsuranceCo.LtdProgotiGeneralInsuranceCo.LtdProvatiInsuranceCo.LtdPurabiGeneralInsuranceCo.LtdRelianceInsuranceCo.LtdRupaliInsuranceCo.LtdUnitedInsuranceCo.LtdTakafulIslamiInsuranceCompanyLimitedCrystalInsuranceCo.LtdRepublicInsuranceCompanyLimitedGlobalInsuranceCompanyLimitedParamountInsuranceCo.Ltd.StandardInsuranceCo.Ltd.AsiaPacificInsuranceCo.Ltd.SouthAsiaInsuranceCo.Ltd.ExpressInsuranceLtd.ContinentalInsuranceLtd.DeshGeneralInsuranceLtd.

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b)SecurityFirmsFinancialinstitutionsthatunderwritesecuritiesandengageinrelatedactivitiessuchassecuritiesbrokerage,securitiestradingandmakingamarketinwhichsecuritiescantrade.NabiulKarimSecuritiesLtd.HajiMohammadAliSecuritiesLtd.GMFSecuritiesLimitedQuaiyumSecuritiesLtd.DragonSecuritiesLtd.TAKhanSecuritiesCo.Ltd.,Md.FokhrulIslamSecuritiesLimited.ShahiqSecuritiesLtd.HabiburRahmanSecuritiesLimitedErshadSecuritiesLtd.MianAbdurRashidSecuritiesLtd.KhurshidSecuritiesLtd.RapidSecuritiesLimitedDawnSecuritiesLimited.ArafatSecuritiesLtd.ShahedSecuritiesLtd.TobrakSecuritiesLtd.MidwaySecuritiesLtd.ParkwaySecuritiesLtd.HRSecurities&InvestmentLimtedKaziFerozRashidSecuritiesLtd.MAHSecuritiesLtd.DMRSecuritiesServicesLtd.AlhajJahanaraSecuritiesLtd.RNISecuritiesLtd.GQSecuritiesLtd.CrestSecuritiesLimited.AsenzSecuritiesLtd.FinvestSecuritiesLtd.MAHSecuritiesLimitedNabiulKarimSecuritiesLimitedJalalabadSecuritiesLimitedHajiMohammadAliSecuritiesAkijSecuritiesLimitedMianAbdurRashidSecurities13


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c)InvestmentBanksItprimarilyhelpsnetsuppliersoffundstransferfundstonetusersoffundsatalowcostandwithmaximumdegreeofefficiency.BayLeasing&InvestmentsLimited.UnionCapitalLtd.FirstLeaseInternationalLimitedPhoenixLeasingCo.Ltd.PeoplesLeasing&FinancialServicesLtd.d)FinancialCompaniesTheprimaryfunctionoffinancecompaniesistomakeloanstobothindividualsandbusiness.Financecompaniesprovidesuchservicesasconsumerlending,businesslendingandmortgagefinancing.IndustrialDevelopmentLeasingCompanyofBangladesh(IDLC)InfrastructureDevelopmentCompanyLimited(IDCOL)GSPFinanceLimitedDeltaBracHousingFinanceCorporationLtd.FidelityAssets&SecuritiesCompanyLimited.FareastFinance&InvestmentLtd.LankaBanglaFinanceLtd.PrimeFinance&InvestmentLimitedBangladeshIndustrialFinanceCo.Ltd.e)MutualFundsMutualfundsareportfoliosofdifferentsecuritiessuchasstocks,bonds,treasuries,derivatives,etc.Mutualfundspoolmoneyofbothindividualandinstitutionalinvestorsallowingthefundstoachieve:(i)economiesofscalebyreducingcostsandincreasinginvestmentreturns;(ii)divisibilityanddiversification;(iii)activemanagementwithsuperiorstockpickingandmarkettiming;(iv)reinvestmentofdividends,interestandcapitalgains;(v)tax-efficiency;and(vi)buyingandsellingflexibility.Theremightbevarietiesofmutualfundsthatdifferintermsoftheirinvestmentobjectives,underlyingportfoliosofshares,risksandreturns,feesandexpenses,etc.Mutualfundsareprofessionallymanagedinvestmentschemesthatcollectfundsfromsmallinvestorsandinvestinstocks,bonds,shorttermmoneymarketinstruments,andothersecuri

ties.Thisensuresadiversifiedportfoliofortheinvestorsatmuchlesseffortsthanthroughpurchasingindividualstocksandbonds.Fundmanagerswhoundertaketradingofthepooledmoneyandareresponsibleformanagingtheportfolioofholdingsusuallymanagemutualfunds.Generally,mutualfundsareorganizedunderthelawascompaniesorbusinesstrustsandmanagedbyseparateentities.Mutualfundsfallintotwocategories:open-endfundsandclosedendfunds.14


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Somecategoriesofmutualfundsare:ICB,1stICBMutualFund,2ndICBMutualFund,3rdICBMutualFund,4thICBMutualFund,5thICBMutualFund,6thICBMutualFund,7thICBMutualFundICBMutualFund1stBSRSMutualFundAIMSFirstGrantedMutualGrameenMutualFundOneGrameenOne:SchemeTwoICBAMCL1stMutualFundICBAMCLIslamicMutualFundICBAMCLUnitFundICBAMCLPensionHolderUnitFundICBAMCLFirstNRBMutualFundICBAMCLSecondNRBMutualFundf)PensionFundsPensionfundsareanalyzedasfinancialintermediariesusingafunctionalapproachtofinance,whichencompassestraditionaltheoriesofintermediation.Fundsfulfillanumberofthefunctionsofthefinancialsystemmoreefficientlythanbanksordirectholdings.Theirgrowthcomplementsthatofcapitalmarketsandtheyhaveactedasmajorcatalystsofchangeinthefinanciallandscape.Financialefficiencyinthisfunctionalsenseisnottheonlyreasonforgrowth.Itisalsoaconsequenceoffiscalincentivesandbenefitstoemployers,aswellasgrowingdemandarisingfromtheageingofthepopulation.Employers,suchascompanies,publiccorporations,andindustryortradegroups,typicallysponsorpensionfunds;accordingly,employersaswellasemployeestypicallycontribute.Fundsmaybeinternallyorexternallymanaged.Returnstomembersofpensionplansbackedbysuchfundsmaybepurelydependentonthemarket(definedcontributionfunds)ormaybeoverlaidbyaguaranteeoftherateofreturnbythesponsor(definedbenefitfunds).

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02.FinancialInstruments:Afinancialinstrumentisanycontractthatgivesrisetoafinancialassetofoneentityandafinancialliabilityorequityinstrumentofanotherentity.Afinancialassetisanyassetthatis:(i)Cash;(ii)Anequityinstrumentofanotherentity;Acontractualright:(i)Toreceivecashoranotherfinancialassetfromanotherentity;or(ii)Toexchangefinancialassetsorfinancialliabilitieswithanotherentityunderconditionsthatarepotentiallyfavorabletotheentity.Acontractthatwillormaybesettledintheentitysownequityinstrumentsandis:(i)Anon-derivativeforwhichtheentityisormaybeobligedtoreceiveavariablenumberoftheentitysownequityinstruments;or(ii)Aderivativethatwillormaybesettledotherthanbytheexchangeofafixedamountofcashoranotherfinancialassetforafixednumberoftheentitysownequityinstruments.Forthispurposetheentitysownequityinstrumentsdonotincludeinstrumentsthatarethemselvescontractsforthefuturereceiptordeliveryoftheentitysownequityinstruments.Thespecificform,whichaclaimtakes,isafinancialinstrument.Therangeofinstrumentsisexistenceandalsobecauseitenablesustodistinguishcertainbroadcategoriesofinstrument.Selectionsofinstrumentsare:TreasureBillsCommercialPaperNegotiableCertificateofdepositsBankrAcceptancesBondsStocksGovt.SecuritiesBank&ConsumerCommercialPaperenturesMortgagesCompanysharesandgovernmentstock,forexample,oncecreatedcanbeboughtandsoldinorganizedmarketswithouttheiroriginalissuerseveragainbeinginvolved.Instrumentsthatareissuedwithafixedrateofinterest

foraslongastheyexistgovernmentbonds,forexamplefromthoseassetswhoseyieldvariesaccordingtomarketconditions.Thelattercategoryincludesawiderangeofclaimsfrombankdepositstocompanyshares.Averypopularbasisfordistinguishingtypesofinstrumentismaturity.Thismeansthelengthoftime,whichhastoelapsebeforetheclaimisrepaid.Thismaybeverylong.Withcompanyshares,forexample,itistheoreticallyinfinity.Somegovernmentstocksareissuedwithtwenty-fiveyearstomaturity.Contrastthiswithtreasurybills,whichareissuedforninety-onedaysorevenbankdepositsthatcanbedemandedimmediatelyoratsight.16


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02-(i).MoneyMarketInstruments:TheMoneyMarketisaninstrumentofthefixedincomemarket.Generallyspeaking,theterm"fixedincome"issynonymouswithbonds.Inreality,abondisjustonetypeoffixedincomesecurity.Thedifferencebetweenthemoneymarketandthebondmarketisthatthemoneymarketspecializesinveryshort-termdebtsecurities(debtthatmaturesinlessthanoneyear).Moneymarketinvestmentsarealsocalledcashinvestmentsbecauseoftheirshortmaturities,andtheirnear-liquidnature(almostimmediateaccessuponrequest).MoneymarketsecuritiesareessentiallyIOU sissuedbygovernments,financialinstitutions,andlargecorporations.Theseinstrumentsareveryliquidandconsideredextraordinarilysafe.Becausetheyareextremelyconservative,moneymarketsecuritiesoffersignificantlylowerreturnthanmostothersecurities.Oneofthemaindifferencesbetweenthemoneymarketandthestockmarketisthatmostmoneymarketsecuritiestradeinawfullyhighdenominations.Thislimitstheaccessoftheindividualinvestor.Furthermore,themoneymarketisadealermarket,whichmeansthatfirmsbuyandsellsecuritiesintheirownaccounts,attheirownrisk.Comparethistothestockmarketwhereabrokerreceivescommissiontoactsasanagent,whiletheinvestortakestheriskofholdingthestock.Anothercharacteristicofadealermarketisthelackofacentraltradingfloororexchange.Dealsaretransactedoverthephoneorthroughelectronicsystems.Theeasiestwayforustogainaccesstothemoneymarketiswithamoneymarketmutualfunds,orthroughmoneymarketbankaccount,whichareofferedatthiswebsite..Theseaccountsandfun

dspooltogethertheassetsofthousandsofinvestorsinordertobuythemoneymarketsecuritiesontheirbehalf.However,somemoneymarketinstruments,liketreasurybills,maybepurchaseddirectly.Failingthat,theycanbeacquiredthroughotherlargefinancialinstitutionswithdirectaccesstothesemarkets.Callmoneyrate-therateatwhichshorttermfundsarelentandborrowedamongbanks-isthecoreofanovernightmoneymarketforcredit.Volatilityoftheovernightmoneymarketrate(callmoneyrate)isaveryusualphenomenonforawellfunctioningmarket.Marketparticipantsdeterminetherateaccordingtotheirperceptionsofthecurrentandfutureliquidityconditioninthemarket.Thusthisratereflectsthesupplyanddemandbehaviorofbankreserves,andhence,givesimportantsignalstothecentralbanktounderstandthemarketpressure.CallmoneyrateinBangladeshcanbeviewedasamarket-clearingrate.Fluctuationsintheovernightratescomemainlyfromsupplyanddemandforliquidityinthemone

ymarket.Periodicchangeinreserverequirementsaswellaseconomicandseasonalfactorsmaycausethedemandtorise.TheovernightmoneymarketratecanalsobeimpactedonthedayswhenBangladeshBank(BB)conductsopenmarketoperations.a)TreasureBillsDeptobligationsoftheGovernmentusedtofinancefiscaldeficits.BangladeshBanktreasurebillsareissuedinonethree,six,twelvemonthandtwoyearmaturity.Theypayasetamountatmaturity.17


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b)CommercialPaperItisanunsecuredshort-termpromissorynotesissuedbyacorporationtoraiseshorttermcash,oftentofinanceworkingcapitalrequirements.ASamplecopyofCommercialPaperisgivenbelow:01.PARTNERSHIPACCOUNT:

TERMS&CONDITIONS

Werequestandauthorizeyouuntilanyoneofusshallgiveyounoticeinwritingtothecontrary,tohonouranddebittothefirmsaccountallCheques,Guarantees,NegotiableInstruments,orotherOrderswhichmaybedrawn,orBillsAcceptedorNotesmadeorReceiptsforMoneyowingbyyoutothefirmsignedbyanyoneofusinthenameoronbehalfofthefirm,whetherthefirmsAccountbeforthetimebeingincreditoroverdrawnormaybecomeoverdrawninconsequenceofsuchdebitandwewillbejointlyandseverallyresponsiblefortherepaymentofanysuchoverdraftandinterestthereagainst.-WealsorequestandauthorizeyoutoaccepttheendorsementofanyoneofusinthenameoronbehalfofthefirmonCheques,Orders,Bills,NotesorotherNegotiableInstruments.-Youareherebyauthorizedtocarryoutanyinstructioninconnectionwiththeaccount(includinginstructionofcountermandingpaymentofCheques,BillsofExchange,PromissoryNotesororderforpayment)whensuchinstructionsaregivenbyalloranyoneofus.-Anysecurityorotherpropertyofordepositedinthenameofthefirmmaybewithdrawnandanymoneymaybeborrowedfromyouinthenameoronbeha

lfofthefirmandmaybesecuredinanymanneruponanysecuritymoneyorpropertyofordepositedinthenameofthefirmbyanyoneofusandwewilljointlyandseverallyberesponsibleforrepaymentofsuchmoneywithinterest,costs,chargesandexpenses.-Anyliabilitywhatsoeverincurredinrespectoftheaccountshallbejointandseveral.-Thisauthorityshallremaininforceuntilrevokednotwithstandinganychangeintheconstitutionornameofthefirmandshallapplynotwithstandinganychangeinthemembershipofthefirmbydeath,bankruptcy,andretirementorotherwiseortheadmissionofanynewpartner(s).(ThisaccountopeningformmustbesignedbyallthePartners)

PartnersSignatureName:02.LIMITEDCOMPANY:

PartnersSignatureName:



AtGeneralMeeting/aMeetingoftheBoardorDirectorsofLimitedhuntwithONEBankLimited..BranchandwehavebeenauthorizedtoadvisetheBngly.WeenclosethefollowingDocumentsforthepurpose:a.CertifiedcopyoftheMemorandum&ArticlesofAssociationoftheCompany.b.CertificateofIncorporationoftheCompanyforinspectionandreturn,andadulycertifiedphotocopyforBanksrecordc.CertificatefromtheRegistrarofJointStockCompaniesthatthecompanyisentitledtocommencebusiness(incaseofPublicLtd.Co.)forinspectionandreturn,andadulycertifiedPhotocopyforBanksrecord.d.Latest

copyofBalancesheet.e.ExtractofresolutionoftheBoard/GeneralMeetingoftheCompanyforopeningtheaccountandauthorizationforitsoperationdulycertifiedbytheChairman/ManagingDirectoroftheCompany.ListofDirectorswithaddresses(alatestcertifiedcopyoftheform-xii)

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STRUCTUREOFFINANCIALSYSTEMINBANGLADESHWewouldnowrequestyoutoopenaCurrent/..AccountinthenameoftheCompany.WndertaketoadvisetheBank,ofchangesintheauthorizedsignaturesandthesewillbesupportedbyfurtherResolutionoftheCompany.WeagreetocomplywiththerulesgoverningtheaccountofONEBankLimitedandagreetocomplywiththeScheduleofChargesoftheBank.AuthorizedSignatureName:AuthorizedSignatureName:AuthorizedSignatureName:AuthorizedSignatureName:

03.GENERALCONDITIONSOFGOVERNINGACCOUNTS:a)Thelaw,rulesandregulationsofBangladesh,usualcustomsandprocedurescommontoBanksinBangladeshwillapplytoandgoverntheconductsoftheaccountopenedwiththeBank.b)Anypersonopeninganaccountwillbedeemedtohaveread,understoodandacceptedtherulesgoverningtheaccount.c)AsuitableintroductionbyanintroduceracceptabletotheBankisrequiredpriortoopeningofanyaccount.Recentphotographsoftheaccountopenersdulyattestedbytheintroducermustbeproduced.d)Eachaccountwillbegivenoneaccountnumber.Thisnumberistobeproperlyquotedonalllettersand/ordocumentsaddressedtotheBankandonalldepositslips.TheBankwillnotberesponsibleforanylossordamageoccurringasaresultofwrongquotationofaccountnumber.e)Interest/commissions/serviceormaintenanceofaccountchargeswillbeleviedbytheBankasdeterminedbytheBankfromtimetotimeandasperBangladeshBankregulation.f)Thefundsavailableinanyoftheaccountholdersaccount(thecustomer)withtheBankwillbeconsideredbytheBanktobeasecurityforanycommitment(s),theBankisentitledwithoutgivingpriornoticetothecustomertoutilizesuchfundsagainsttheobligati

on(s)and/orcommitment(s)ofthecustomertotheBank.g)Anystatementofaccountdispatchedtothecustomerwillbeconsideredasapprovedunlessanydiscrepancy(-ies)is/arenotifiedinwritingtotheBankwithin15daysfromthedateofdispatch.TheBankisnotresponsiblefordelaysornon-deliveryduetomailproblems.Statementofaccounttobepickedupwillbeconsideredasapprovedevenifnotpickedup15daysafterthedatetheyareproduced.Statementsofaccountarenotproducedwhenthereisnooperationduringthemonth.Thosecanbeobtainedonspecialrequest.h)AccountholdersmustprovidemaximumsecuritytothechequebooksintheirpossessionandtheBankisnotresponsibleforanylossoccurringduetoinadequacyofsecurity.AnychequebooklossormisusemustbeimmediatelyreportedtotheBankandconfirmedinwritingwithoutanydelay.i)WhenchequedepositedarepayablebyotherBanksoroutstation,theyareavailableafterclearingorcollectiononly.Servicechargewillbecharged@Tk.100/

-inCurrentA/CandSavingsA/CHalfyearlyoraschangedbythebankfromtimetotimeasandwhenrequired.j)TheBankreservestherighttocloseanyaccountwithoutgivingpriornoticeiftheconductoftheaccountisunsatisfactoryintheopinionoftheBankorforanyotherreason(s)whatsoever.k)Thebalanceintheaccount(s)ispayablesolelyatONEBankLimitedandshallbegovernedbyandsubjecttolawsineffectinBangladesh.AsusedhereinlawswillincludeBankCirculars,Modifications,RegulationsandOrdersoftheGovernmentandBangladeshBankincludingpracticeofbanking.l)TheBankreservestherighttoamendthepresentrulesatanytimeinanymannerwithorwithoutgivingpriornoticetotheaccountholder(s)separatelyortothepublic.Thechequebookwillnotbeissuedunlessanduntilalltherequiredformalitiesarecompleted.04.AGREEMENT:I/Weherebyagreetotheabovegeneralconditions.

Signatureoftheapplicant/Authorizedsignature




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c)NegotiableCertificateofdepositsNegotiablecertificateofdepositmeansashort-termsecurity,typicallyissuedbyabanktoraisefunds.ANegotiableCertificateofDepositisashort-terminvestmentinasecurity,beinganegotiablecertificateofdepositissuedbyNAB.IfyouchoosetoinvestinaNegotiableCertificateofDeposit,youpaythepurchasepriceonthepurchasedate.Onthematuritydate,NABpaysyouthefacevalueoftheNegotiableCertificateofDeposit.Thereturnonyourinvestmentisequaltothedifferencebetweenthepurchasepriceandthefacevalue.d)BankerAcceptancesItisatimedraftpayabletoasellerofgoods,withpaymentguaranteedbyabank.Timedraftsissuedbyabankareordersforthebanktopayaspecifiedamountofmoneytothebearerofthetimedraftonagivendate.

02-(ii).CapitalMarketInstruments:CapitalMarketInstrumentsareanumberofcapitalmarketinstrumentsusedformarkettrade,includingstocks,bonds,debentures,foreignexchange,fixeddeposits,andothers.Theinvestorstomakeaprofitoutoftheirrespectivemarketsusethese.Allofthesearecalledcapitalmarketinstrumentsbecausetheseareresponsibleforgeneratingfundsforcompanies,corporations,andsometimesnationalgovernments.Thismarketisalsoknownassecuritiesmarketbecauselong-termfundsareraisedthroughtradeondebtandequitysecurities.Bothcompaniesandgovernmentsmayconducttheseactivities.Thismarketisdividedintoprimarycapitalmarketandsecondarycapitalmarket.Theprimarymarketisdesignedfor

thenewissuesandthesecondarymarketismeantforthetradeofexistingissues.Stocksandbondsarethetwobasiccapitalmarketinstrumentsusedinboththeprimaryandsecondarymarkets.Therearethreedifferentmarketsinwhichstocksareusedasthecapitalmarketinstrument:thephysical,virtual,andauctionmarkets.Bonds,however,aretradedinaseparatebondmarket.Thismarketisalsoknownasadebt,credit,orfixedincomemarket.Tradeindebtsecuritiesaredoneinthismarket.TherearealsotheDebenturesthatareusedascapitalmarketinstrumentsbytheinvestors.Theseinstrumentsaremoresecuredthantheothers,buttheyalsoprovidelessreturnthantheothercapitalmarketinstruments.Whileallcapitalmarketinstrumentsaredesignedtoprovideareturnoninvestment,therisk

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factorsaredifferentforeachandtheselectionoftheinstrumentdependsonthechoiceoftheinvestor.Therisktolerancefactorandtheexpectedreturnsfromtheinvestmentplayadecisiveroleintheselectionbyaninvestorofacapitalmarketinstrument.Capitalmarketinstrumentsshouldbeselectedonlyafterdoingproperresearchinordertoincreaseone.BangladeshCapitalMarketSummary(Ason31March2008)IndicatorsNo.ofcompaniesNo.ofmutualfundsNo.ofdebenturesNo.oftreasurybondsNo.ofcorporatebondsTotalNo.ofListedSecurities

DhakaStockExchange270148751368

ChittagongStockExchange215141230

a)BondsBondmarketlinksissuershavinglongtermfinancingneedswithinvestorswillingtoplacefundsinalongterm,interestbearingsecurities.Amatureddomesticbondmarketofferswiderangeoffundingforthegovernmentandtheprivatesector.Whilefixedincomeinstrumentsaretheepitomeoflongtermfinanceoptions,thesizeoftradablegovernmentbondsissmall,secondarytradingisrare,andmorecritically,publicissueofcorporatebondsmayremainsuspended,asithasbeenthecaseinBangladeshsince1996[HossainandAzim,2005].BangladeshBankhastakenanumberofinitiativestopromotebondmarketdevelopment,suchaschanginglegalandregulatoryframeworkandalsothetaxsystemforse

curing,orissuingofzero-couponbonds.Buttherearesomemajorproblemsindevelopmentofbondmarketinthecountry:weakgovernanceattheinstitutionalandmarketlevels;highnon-performingassetsofthenationalizedcommercialbanks(NCBs);poorlydefinedandoverlappingresponsibilitiesofSecuritiesandExchangeCommission(SEC)andMinistryofFinance;andthelackofincentivesandprivateinitiativestodrivemarketdevelopments.Thegovernmentisawareoftheseproblems,andinternationalorganizationssuchasWorldBank,IMFandsomeagenciessuchasIFCorADBhavebeenobservingtopushforpossiblesolutions.

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b)StocksThestockmarketisanimportantingredientofthefinancialsysteminBangladesh.Itisanimportantavenueforchannelingfundstoinvestorsthroughmobilizingresourcesfromindividuals.Inviewoftherapidlyincreasingroleofthestockmarket,volatilityinstockpricescanhavesignificantimplicationsontheperformanceofthefinancialsectoraswellastheentireeconomy.Thereexistsimportantlinkbetweenstockmarketuncertaintyandpublicconfidenceinthefinancialmarket.

c)Govt.SecuritiesThegovernmenthasinitiatedreformsprogramintheareaofdebtmanagementsince2005.IthasenactedtheBangladeshGovernmentTreasuryBonds(BGTB)Rules,2003underwhichT.Bondsarebeingmarketedonaregularbasis.DevelopmentofaprimarymarketforbuyingandsellingofGovernmentbondsofvaryingmaturity(5year,10-year,15yearand20-year)toraisefundfromthedomesticmarketisoneofthesignificantachievementsofsuchreformsinitiatives.

TreasuryBillsandTreasuryBondsauctionsarebeingheldonthebasisofapre-announcedAuctionCalendar.Thisensureshigherdegreeofcompetitionresultingasteadydeclineinthecostofborrowingforthegovernmentfromdomesticsource.

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d)Bank&ConsumerCommercialPaperThepaperintendstoprovideanoverviewofkeyissuespertainingtoconsumerconfidenceinfinancialmarketsinBangladesh.TheformalfinancialsectorinBangladeshincludes:(a)BangladeshBankasthecentralbank(b)43commercialbanks,includingfournationalizedcommercialbanks,30domesticprivatecommercialbanks,9foreigncommercialbanks(c)5government-ownedspecializedbanks(d)28non-bankfinancialinstitutions(e)onegovernment-ownedinvestmentcompany(f)twogovernment-ownedinsurancecompaniesandaquitegoodnumberofprivateinsurancecompaniesand(g)twostockexchanges.Thebankingsector,however,dominatesthecountrysfinancialsystem.Consumerconfidencemaybedefinedastheconsumersappraisalofthecurrenteconomicconditionsandhisexpectationsoffutureeconomicconditions.Asilentrevolutionhadoccurredinfinancialserviceslegislationandregulationinthedirectionofbuildingconsumerconfidenceinthemarkets,itisfeltthatthereisaneedforexploringwaysforfurtherimprovementofmarketconditionstomeettheexpectationofconsumersoffinancialservices.Inthisbackdropthepaperwilldiscussvariousfactorsunderminingconsumerconfidenceinthefinancialmarkets,retracethelegislativeandregulatorymeasuresundertakeninthepasttoprotectconsumerinterestandsuggestfurtheractionsneededtoenhanceconsumerconfidenceinthefinancialservicessectorinBangladesh.e)DebenturesWhenanydulystampeddebentureisrenewedbytheissueofanewdebentureinthesameterms,theCollectorshall,uponapplicationmadewithinonemonth,repaytothepersonissuingsuchdebenture,thevalueofthestampontheoriginaloronthenewdebe

nture,ProvidedthattheoriginaldebentureisproducedbeforetheCollectorandcancelledbyhiminsuchmannerastheGovernmentmaydirect.Adebentureshallbedeemedtoberenewedinthesametermswithinthemeaningofthissectionnotwithstandingthefollowingchanges:(a)Theissueoftwoormoredebenturesinplaceofoneoriginaldebenture,thetotalamountsecuredbeingthesame;(b)Theissueofonedebentureinplaceoftwoormoreoriginaldebenture,thetotalamountsecuredbeingthesame;(c)Thesubstitutionofthenameoftheholderatthetimeofrenewalforthenameoftheoriginalholder;and(d)Thealterationoftherateofinterestorthedatesofpaymentthereof.

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f)MortgagesMortgagemarketsmeanslendinginstitutions&mortgagebrokers.AccordingtoMinistryoflaw,Bangladesh-ChapterIV:Sec.(58)Mortgage,mortgagor,rtgagee,Mortgage-moneyandmortgage-deeddefinedas:Simplemortgage,mortgagebynditionalsale,usufructuarymortgage,englishmortgage,mortgagebydepositoftitledeedsanomalousmortgage.Sec.(59)Mortgagewhentobeassurance.Sec.(59.A)Referencestomortgagorsandmortgagestoincludepersonsdrivingtitlefromthem.Mortgageloantakenouttobuythefamilyhomefromthemortgagemarket.Thirtyyearsago,suchaloanwouldalmostcertainlyhavecomefromabuildingsociety.Theborrowerwouldprobablyhavehadtowaitinaqueue,whichheorshecouldjoinonlyafterhavingsavedforsomeperiodwiththesociety.Theloanwouldhavebeeninsterlingandtheborrowerwouldhavepaidarateofinterestthatvariedatshortnotice(broadly)withchangesinthelevelofofficialinterestratesimposedbythemonetaryauthorities.Theinterestwouldhavebeenpaidmonthlytogetherwithasmalladditionalsumcalculatedtorepaytheloanoverascheduledperiod,suchloanswereinstantlyavailablefromarangeofinstitutions.Theycouldberepaidbythemethoddescribedaboveortheycouldbeinterest-onlymortgagesinwhichtheborrowerpaysonlytheinterestbutmakessimultaneouspaymentsintoalong-termsavingsscheme(typicallyanendowmentinsurancepolicy),whichisdesignedtorepaythemortgagewhenthepolicymatures.Themortgagemayhavearateofinterestthatcanbefixedforlongperiods.

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03.FinancialMarkets

Anorganizationalframeworkwithinwhichfinancialinstrumentscanbeboughtandsold.Ineconomicsamarketisanorganizationaldevicethatbringstogetherbuyersandsellers.Textbooksusuallyhurryontopointoutthatamarketdoesnothavetohaveaphysicallocation,thoughplainlyitcoulddoso.Infact,financialmarketsoffersomeofthebestexamplesofbuyersandsellersinteractingoverawidelydispersedgeographicalarea.

Financialmarketofaneconomycomprisesthebankingsector,otherfinancialinstitutionsandcapitalmarket.Atpresent,4SCBs,5nationalizedspecializedbanks,30privatecommercialbanks,9foreigncommercialbanksand29non-bankfinancialinstitutions,InvestmentCorporationofBangladesh(ICB),BangladeshHouseBuildingFinanceCorporation(BHBFC),DhakaStockExchange(DSE)andChittagongStockExchange(CSE)areworkinginthefinancialmarketofBangladesh.

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Banksandotherfinancialinstitutions(OFIs)havebeenplayingakeyroleinactivatingthefinancialsectorthatinturninfusesdynamismtotheeconomy.Banksareengagedinupgradingthesocio-economicstatusofthecountrybyinvestingmoneytoproductivesectors.However,inthecontextofglobalization,importancehasbeengiventothedevelopmentofthefinancialmarketthroughbankingsector.Inordertoupholdtheruleofbankingsectorinfinancialmarketdevelopment,thegovernmenthastakenarangeofmeasures,whichincludefurtherdeploymentofbankbranchesandevaluationoftheirperformance,classificationofloansfollowingtheinternationalstandards,assessmentofcapitaladequacy,determinationofqualityofassetsandearningofimpressiveprofit.

03-(i).

PrimaryMarket

Meansnewcapitalroseinthefinancialmarkets.Primarymarketservicesareincluded:Theinvestmentbanking&Thefinancialintermediationetc.

(Tk)

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03-(ii).

SecondaryMarket

Marketsinwhichexistingsecuritiesaretraded;asopposedtoaprimarymarketwheresecuritiesaresoldforthefirsttime.Inmostcasesastockexchangelargelyfulfilstheroleofasecondarymarket,withtheflotationofnewissuesrepresentingonlyasmallproportionofitstotalbusiness.However,itistheexistenceofaflourishingsecondarymarket,providingliquidityandthespreadingofrisk.Meansexchangeofownershipinthefinancialmarkets.Secondarymarketservicesincluded:Brokerageservices

Tk

Tk

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03-(iii).MoneyMarketMonetarypolicyframeworkreferstoalogicalandsequentialsetofactionsthatacentralbankhastodesigntoconductmonetarypolicy.Thecentralbankwantstoachievecertaingoalsbutcannotdirectlyinfluencethegoals.Ithasasetoftoolsatitsdisposalthatcanaffectthegoalsindirectlyafterlongandvariablelags.So,ifcentralbankwaitstoseetheeffectofthetoolsonthegoalsitwillbetoolatetomakeanycorrectiontothepolicy.Thatiswhyitaimsatsomevariablesthatliebetweentoolsandgoals,whichitcaninfluenceandmonitorveryshortly.Thusacentralbankdecidesonthestrategyforconductingmonetarypolicy.Thevariablesthatthecentralbankaddressescanbeclassifiedasinstruments,targetsandgoals.Iftheframeworkisexpressedinaflowchartinstruments(i.e.tools)andgoalsareonthetwoendsandtargetsareinbetween.Thetargetsarefurtherclassifiedasoperationaltargetandintermediatetarget.Thecentralbankalsokeepsaneyeonsomeinformationvariablestomakeanypolicydecision.

03-(iv).CapitalMarketThecapitalmarketinBangladeshisregulatedandsupervisedbytheSecuritiesandExchangeCommission(SEC)undertheSECAct,1993.TheSECsofarhasissuedlicensesto27non-bankinstitutionstoparticipateinthecapitalmarketofwhich19institutionsareMerchantBankerandPortfolioManagerwhile7areIssueManagersand(one)actsasIssueManagerandUnderwriter.TheDhakaStockExchang

e(DSE),whichwasestablishedasapubliclimitedcompanyinApril1954,andtheChittagongStockExchange(CSE),establishedinApril1995,dealinginthesecondarycapitalmarket.AsofendDecember2006thetotalnumberofenlistedsecuritieswithDSEstoodat310ofwhich255arelistedcompanies,13mutualfunds,8debenturesand34treasurybondsaftertheyear2006thatthetotalnumberofinstitutionsareincreasingrapidly.

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Recently,two(2)-powersectorcompaniesnamelyDhakaElectricSupplyCompany(DESCO)andPowerGridCompanyofBangladesh(PGCB)havebeenlistedinthecapitalmarketunderthenewlyintroduceddirectlistingregulation.TheInvestmentCorporationofBangladesh(ICB)wasestablishedin1976withtheobjectiveofencouragingandbroadeningthebaseofindustrialinvestment.ICBunderwritesissuesofsecurities,providessubstantialbridgefinancingprograms,andmaintainsinvestmentaccounts,floatsandmanagesclosed-endandopen-endmutualfundsandclosed-endunitfundstoensuresupplyofsecuritiesaswellasgeneratingdemandforsecurities.ICBalsooperatesinbothDSEandCSEasdealer.SomeSBs,suchasBangladeshShilpaBank(BSB),BangladeshShilpaRinSangstha(BSRS),BangladeshSmallIndustriesandCommerce(BASIC)BankLtd.AswellasNCBsandsomeforeignbanksareengagedinlong-termindustrialfinancing.CapitalMarketproductinBangladesh:Share:OrdinaryShare,PreferenceShareMutualFundDebtSecuritiesDebentureBondAwell-developedtradablebondmarketiscriticaltoensuringstabilityandefficiencyofthefinancialmarketinBangladesh.Inthecountry,mostoftheavailablesavingsareheldbythebanksintheformofdepositsthatarechanneledthroughlendingtotheinvestors.Thedominanceofbanks,withhighbadloanportfoliosandnontransferabilityofmostoftheirdebt/savingsinstruments,isaprimehindrancetodevelopingawell-performingbondmarket.Theabsenceofsuchamarketmakesthefinancialmarketlesscompetitiveasitfailstogeneratemarketinterestratesthatreflecttheopportunitycostoffundsatdifferentmaturitiesandresultsinexcessiverelianceonthebankingsystem.

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