DIBOR to be introduced in country's money market
Sunday, 12 October 2008
Siddique Islam
A code of conduct for operation of Dhaka Interbank Offered Rate (DIBOR), a benchmark, is being formulated for daily transaction in the country's money market.
A three-member sub-committee of the Bangladesh Foreign Exchange Dealers' Association (BAFEDA) is now working on formulation of the code of conduct for operating the DIBOR to ensure discipline in the market.
"We are now working on technical aspects of the DIBOR," a member of the committee told the FE Saturday, adding that the committee would submit its report to the BAFEDA by the next month.
The DIBOR is a rate at which banks are prepared to lend to each other for specified maturities within the Dhaka market.
It is also fixed daily for reference purposes and is a key interest rate level used for setting rates for loans and floating rate notes and for calculating cash settlements of certain interest rate derivative instruments.
The committee member also said the country's secondary securities market will be strengthened after introduction of the DIBOR.
Earlier, a focus group on secondary market and settlement system of bond market recommended introduction of DIBOR to bring dynamism in the market.
The group also recommended constituting a term structure of the yield curve to help the central bank launch it in the market as soon as possible.
The newly formed Primary Dealers Association of Bangladesh (PDAB) will meet at the Prime Bank Limited on October 20 to review the overall secondary bond market.
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.
A code of conduct for operation of Dhaka Interbank Offered Rate (DIBOR), a benchmark, is being formulated for daily transaction in the country's money market.
A three-member sub-committee of the Bangladesh Foreign Exchange Dealers' Association (BAFEDA) is now working on formulation of the code of conduct for operating the DIBOR to ensure discipline in the market.
"We are now working on technical aspects of the DIBOR," a member of the committee told the FE Saturday, adding that the committee would submit its report to the BAFEDA by the next month.
The DIBOR is a rate at which banks are prepared to lend to each other for specified maturities within the Dhaka market.
It is also fixed daily for reference purposes and is a key interest rate level used for setting rates for loans and floating rate notes and for calculating cash settlements of certain interest rate derivative instruments.
The committee member also said the country's secondary securities market will be strengthened after introduction of the DIBOR.
Earlier, a focus group on secondary market and settlement system of bond market recommended introduction of DIBOR to bring dynamism in the market.
The group also recommended constituting a term structure of the yield curve to help the central bank launch it in the market as soon as possible.
The newly formed Primary Dealers Association of Bangladesh (PDAB) will meet at the Prime Bank Limited on October 20 to review the overall secondary bond market.
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.