The DSE Brokers Association of Bangladesh on Monday urged the interim government to form a taskforce for the development and growth of the country鈥檚 capital market.
The DBA sent a letter to finance adviser Salehuddin Ahmed on the day.
Signed by Saiful Islam, president of the association, the letter also included suggestions for steps towards necessary reforms of the stock market.
鈥楾he Dhaka Stock Exchange has been operating for over 70 years, and the Bangladesh Securities and Exchange Commission has been regulating the market for over 30 years. Despite the long history, the capital market has not yet developed as a significant source of capital formation, business, or employment,鈥� the DBA said in the letter.
The letter stressed the formation of taskforces by the interim government to take necessary steps to reform the financial sectors in the country, and urged the finance adviser to form a taskforce to reform the capital market to promote growth in this sector.
On September 11, the Bangladesh Bank formed a six-member taskforce with the aim of reforming the country鈥檚 banking sector which saw massive irregularities during the Awami League regime.
The 15-year authoritarian rule of Awami League ended on August 5 with Sheikh Hasina resigning as prime minister and fleeing from the country on the day amid a student-led mass uprising.
The DBA letter mentioned that the progress of capital market remained stuck due to inappropriate policies, adverse management of asset management companies, improper pricing in initial public offering and the absence of proper direction for diversified products.
The letter pointed out that the BSEC had struggled to develop the capital market beyond equity, with no progress in expanding the bond market despite years of discussion.
While the BSEC regulates and addresses issues like insider trading, it has not spurred broader market growth, it said.
The DBA suggested adopting a model used by developed countries, where enforcement is strict.
The letter said that self-regulatory organisations could help manage market activities and address wrongdoing.
It also said that outdated margin policies, poorly managed mutual funds and the lack of guidance on IPO pricing and bond trading continued to hinder growth.
Product development is crucial for financing government projects, and converting savings into investments is a priority, it said.
The newly formed interim government found that the economic sector was facing severe challenges, including rising defaulted loans, money laundering and lenient rules for defaulters.
The BB-formed taskforce鈥檚 primary responsibilities include assessing the current financial state of the banking sector, identifying non-performing assets and major risks, reviewing the financial indicators of weak banks, determining provisioning shortfalls, analysing liquidity conditions, calculating net capital, and evaluating the real value of assets.
It will also focus on isolating bad assets from the affected banks.
In addition, the taskforce will propose measures to strengthen governance and risk management in banks, improving their ability to withstand financial crises.
