BB turns down primary dealers' request on securities auction
FE Report | Monday, 7 July 2008
Non-Primary Dealer (PD) banks and financial institutions will continue to participate in the primary auction of the government securities as the central bank refused to impose any restriction on their participation as requested by the Primary Dealers Association of Bangladesh (PDAB).
The Bangladesh Bank (BB) informed the chief executives and heads of treasury of PD banks and a non-banking financial institution (NBFI) about its decision at a meeting held at the central bank Sunday with its Deputy Governor Ziaul Hassan Siddiqi in the chair.
"We will take necessary measure in this connection after observing the bidding performance of the PDs," a BB senior official told the FE after the meeting. He also said the central bank will scrutinise other proposals relating to liquidity support to the PDs.
During the meeting, the PDs urged the central bank not to allow the non-PD banks and financial institutions to participate in the primary auction of the government securities.
The newly formed Primary Dealers Association of Bangladesh (PDAB) earlier requested to impose such restriction on non-PDs and NBFIs to help achieve their success bid ratio.
"We have requested the BB to impose such restriction on non-PDs banks and NBFIs to participate in the primary auction aiming to bring dynamism in the country's secondary securities market," a member of the PDAB told the FE.
He also said the non-PD banks and financial institutions will have to buy the securities from the PDs to meet their statutory liquidity ratio (SLR) if they are not allowed to participate in such auctions.
The meeting discussed different issues including liquidity support to the PDs, improvement of the secondary securities market and achievement of success ratio, they added.
Earlier, the central bank selected nine PDs - eight banks and a 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 Bangladesh Bank (BB) informed the chief executives and heads of treasury of PD banks and a non-banking financial institution (NBFI) about its decision at a meeting held at the central bank Sunday with its Deputy Governor Ziaul Hassan Siddiqi in the chair.
"We will take necessary measure in this connection after observing the bidding performance of the PDs," a BB senior official told the FE after the meeting. He also said the central bank will scrutinise other proposals relating to liquidity support to the PDs.
During the meeting, the PDs urged the central bank not to allow the non-PD banks and financial institutions to participate in the primary auction of the government securities.
The newly formed Primary Dealers Association of Bangladesh (PDAB) earlier requested to impose such restriction on non-PDs and NBFIs to help achieve their success bid ratio.
"We have requested the BB to impose such restriction on non-PDs banks and NBFIs to participate in the primary auction aiming to bring dynamism in the country's secondary securities market," a member of the PDAB told the FE.
He also said the non-PD banks and financial institutions will have to buy the securities from the PDs to meet their statutory liquidity ratio (SLR) if they are not allowed to participate in such auctions.
The meeting discussed different issues including liquidity support to the PDs, improvement of the secondary securities market and achievement of success ratio, they added.
Earlier, the central bank selected nine PDs - eight banks and a 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.