BB allows PD banks to receive liquidity support for 2 months
Thursday, 23 April 2009
FE Report
The central bank has relaxed its guidelines allowing liquidity support to primary dealer (PD) banks and financial institution for two months instead of the existing one month.
Under the amended guidelines, the PDs will be provided liquidity support against both securities devolved on them as well as purchased through successful biding in primary auction for a maximum period of two months from the date of issuance of such securities.
"We've amended the guidelines to provide liquidity support facility to the PDs aiming to bring dynamism in the country's secondary securities market," a senior official of the Bangladesh Bank (BB) told the FE Wednesday.
He also said the BB's latest move will encourage the PDs to offer bids for the government approved securities in the primary auction.
The central bank issued a circular in this connection Wednesday and asked the chief executives of all PDs banks and non-banking financial institution (NBFI) to follow the amended guidelines for liquidity support.
"The PDs will have to apply to the central bank with prescribed form for receiving such liquidity support," another BB official said, adding that the central bank is working continuously to develop the secondary market through providing policy support to the stakeholders.
On June 17 last, the central bank amended its guidelines first time allowing liquidity support to the PDs against devolved treasury bills and bonds for a maximum period of one month from the date of issuance of such securities.
The PDs were earlier allowed to get such support for a period not exceeding one month at a stretch.
"A PD can avail itself of assured normal liquidity support for an amount not exceeding the amount of treasury bills and Bangladesh government treasury bonds (BGTBs) devolved on the PD in primary auctions after adjustment of the devolved amount for the shortfall in statutory liquidity requirement (SLR) and minimum stock, if any, for a period not exceeding one month at a stretch," the BB said in its earlier guideline.
The PDs welcomed the BB's latest move, saying that the measures would help to bring dynamism in the primary as well as secondary markets.
"We'll be able to achieve 40 per cent success ratio target, fixed by the central bank, following availing liquidity support against successful biding along with the development of securities," a senior PD told the FE.
Earlier, the central bank selected nine PDs - eight banks and a non-banking financial institution (NBFI) - to handle government-approved securities in the secondary bond market and issued a guideline for them.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.
A PD will not short-sell any particular issue and will not hold a short position in secondary dealings. The PDs will not act as inter-bank or inter-dealer brokers as specified in the guideline.
The central bank has relaxed its guidelines allowing liquidity support to primary dealer (PD) banks and financial institution for two months instead of the existing one month.
Under the amended guidelines, the PDs will be provided liquidity support against both securities devolved on them as well as purchased through successful biding in primary auction for a maximum period of two months from the date of issuance of such securities.
"We've amended the guidelines to provide liquidity support facility to the PDs aiming to bring dynamism in the country's secondary securities market," a senior official of the Bangladesh Bank (BB) told the FE Wednesday.
He also said the BB's latest move will encourage the PDs to offer bids for the government approved securities in the primary auction.
The central bank issued a circular in this connection Wednesday and asked the chief executives of all PDs banks and non-banking financial institution (NBFI) to follow the amended guidelines for liquidity support.
"The PDs will have to apply to the central bank with prescribed form for receiving such liquidity support," another BB official said, adding that the central bank is working continuously to develop the secondary market through providing policy support to the stakeholders.
On June 17 last, the central bank amended its guidelines first time allowing liquidity support to the PDs against devolved treasury bills and bonds for a maximum period of one month from the date of issuance of such securities.
The PDs were earlier allowed to get such support for a period not exceeding one month at a stretch.
"A PD can avail itself of assured normal liquidity support for an amount not exceeding the amount of treasury bills and Bangladesh government treasury bonds (BGTBs) devolved on the PD in primary auctions after adjustment of the devolved amount for the shortfall in statutory liquidity requirement (SLR) and minimum stock, if any, for a period not exceeding one month at a stretch," the BB said in its earlier guideline.
The PDs welcomed the BB's latest move, saying that the measures would help to bring dynamism in the primary as well as secondary markets.
"We'll be able to achieve 40 per cent success ratio target, fixed by the central bank, following availing liquidity support against successful biding along with the development of securities," a senior PD told the FE.
Earlier, the central bank selected nine PDs - eight banks and a non-banking financial institution (NBFI) - to handle government-approved securities in the secondary bond market and issued a guideline for them.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.
A PD will not short-sell any particular issue and will not hold a short position in secondary dealings. The PDs will not act as inter-bank or inter-dealer brokers as specified in the guideline.