REPORT ON CAPITAL MARKET DEV

Bangladesh Bank suggests BSEC to ensure governance, quality IPOs

HM Murtuza | Published: 00:00, Apr 13,2019

 
 

Bangladesh Bank has suggested that Bangladesh Securities and Exchange Commission should ensure good corporate governance in the country’s capital market and bring good companies to the market to attract investments.
The central bank made the suggestion in its recently published quarterly report titled ‘Capital Market Developments in Bangladesh’ for the October-December period last year.
Mentioning the capital market’s role in economic development as vital, the BB report said, ‘BSEC may undertake some necessary pragmatic steps with appropriate regulatory support to create eagerness of the fund owners to make investments in the capital market.’
‘To this end, BSEC may ensure good corporate governance, motivate good companies for floating shares or bonds and sukuk providing with more attractive incentives,’ it said.
Although the government after the market crash in 2010-11 reconstituted the commission with new members, achieving major goals — enlistment of quality scrips, containing irregularities in different levels, and attracting desired local and foreign investments — have remained a far cry.
Dhaka University’s Centre for Corporate Governance and Finance Studies director M Baki Khalili told New Age, ‘Although ensuring good corporate governance is a common issue, we have to take it seriously as the call has come from the central bank.’
Mentioning lack of governance as the reason for the recent crisis at the capital market, Khalili said that responsibility of ensuing governance did not lie only on the listed companies but also on the regulator.
‘There are lapses on both sides,’ he said, adding that the regulator did not take required measures to enforce rules while the listed companies, particularly well-connected once, refrained from complying with governance rules.
The external and institutional forces held the regulator back from implementing the rules, he said.
Irregularities are taking place in a large scale but no serious regulatory measure has far been taken though the market has been facing a deep trouble, the DU professor said.
Khalili said, ‘Regulations are not all. Listed companies and others must be forced to comply with them.’
It was expected that the demutualisation of stock exchanges would improve the governance in the stock exchanges but it failed to bring any positive change.
The central bank made the suggestion as the country’s capital market is yet to play its due role for economic development and attracting local and foreign investments at desired level, BB officials said.
Besides, quality scrips have remained scarce at the capital market, they said.
Lack of regulatory measures to tackle irregularities in the secondary market, containing illegal private placement business and enlistment of name-only companies have also become major concerns for the country’s capital market in recent times, they added.
The central bank report also mentioned, ‘Historically, in our country, banks have been playing major role of financing long-term capital intensive projects that should have been financed through capital market.’
At the end of December last year, stock market capitalisation to GDP ratio in Bangladesh was only 14.53 per cent.
The ratio was 107 per cent in Thailand, 72.2 per cent in India, 44.60 per cent in Indonesia and 18.21 per cent in Pakistan.
Bangladesh’s capital market has been going through a freefall for last eleven weeks with the key index of Dhaka Stock Exchange, DSEX, dropping by 10.48 per cent, or 623.62 points, to close at 5,326 points on Thursday from 5,950 points on January 26 this year.

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