The Asian Development Bank (ADB) is set to come up with a fund of US$250 million afresh to help complete the remaining reform programmes of Bangladesh's capital market and insurance sector.
Ministry of Finance (MoF) officials said on Thursday, the ADB early this month assured the government of financing the reform programmes relating to capital market, insurance sector and some other monetary and financial sectors.
Meanwhile, the ADB provided $300 million in loans in two trenches under the Capital Market Development Programme (CDMP) during the period of 2012 and 2014 to conduct a raft of reforms in the financial and monetary markets.
Under the proposed $250 million financial support, the Bangladesh Securities and Exchange Commission (BSEC) and the Insurance Development Regulatory Authority (IDRA) would work on these reforms.
Bangladesh's capital market had suffered a big blow in 2010 that affected investors, specially the small and medium ones resulting in an adverse impact on the country's macro-economy.
"Being satisfied over a set of reforms during the CDMP-1 and 2 periods, the ADB has now come up with its fresh proposal to complete the remaining reforms and some other fresh ones in the country's financial and monetary markets," said an MoF official.
"We are hopeful that the Bank will provide us with $250 million in two trenches in the 2015-2016 period to reform the country's capital market and insurance sector," said a senior Economic Relations Division official.
He said they are still discussing with the ADB before finalising the fund as the Bank has suggested a set of fresh reforms in the monetary and financial system, in addition to the incomplete ones of the last programme.
The ERD official said if the government takes the ADB fund, the country's capital market will get a big boost with the reforms to weather the impact of the 2010 debacle and also the financial and monetary sectors.
As per the recommendations of the ADB, the government has already completed some reforms in the financial and monetary markets including amendment of the Bank Company Act, the BSEC law, insurance law and demutualisation of the stock exchanges.
Besides, the government is now working to devise a financial reporting law, set up a special tribunal for the capital market, and strike some other reforms relating to the financial and monetary markets.
As part of the reform measures, the ADB also proposed that the Bangladesh Bank establish a national central pool of funds, including provident funds and pension funds, and thus make those available for investment in government securities.
It also proposed an increase in the number of independent directors of a listed company from 10 per cent to 20 per cent and establishment of an audit committee within the listed company by amending the SEC Code of Corporate Governance, 2006.
Establishment of an independent financial reporting council has also been suggested to pave the way for adopting international accounting standards.
As part of strengthening of the SEC, the ADB recommended for operational and financial efficiency of the securities regulator by allowing its unhindered access to the SEC fund.
This would end the government's intervention in preparation of budget of the SEC and other activities of the stock market regulator, the ADB said.
The CDMP is aimed at making sure that the capital market is more effective in mobilising resources to support the economy's financing requirements to better promote growth and development, the MoF official said.
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