DVP system will be effective from Jan
Friday, 25 December 2009
Siddique Islam
The central bank has introduced a 'delivery versus payment' (DVP) system aiming to boost transactions of the government securities in the secondary market.
"We've introduced the DVP system to develop the government securities market in Bangladesh," General Manager of the Debt Management Department of the Bangladesh Bank (BB) Mijanur Rahman Joddar told the FE Wednesday.
He also said the new settlement system will come into effect from January 1, 2010.
The central bank has already issued a circular in this connection and asked all commercial banks and financial institutions to follow the DVP system for the government securities transactions.
Under the new system, the central bank will take responsibility of both securities and fund to avoid any counterparty risk.
Currently, the BB transfers fund from the sellers account to buyer bank accounts in case of inter-bank repurchase agreement (repo) and reverse repo.
"We'll play a role of a catalyst to settle the deals of securities on the same day under the new arrangement," another BB official said, adding that the DVP system is essential for improving the country's secondary securities market.
In South Asia, India and Pakistan have already introduced the DVP settlement system to boost the transactions in their secondary markets.
The market operators welcomed the BB's latest move, saying that the new international standard transaction settlement system might help boost the trading of government securities in the secondary market.
"The counterparty settlement risk will be totally removed after introduction of the DVP system that would be able to attract banks, particularly foreign commercial banks, in the secondary market," a senior treasury official of a private commercial bank told the FE.
Currently, three treasury bills (T-bills) are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds -- 5-year, 10-year, 15-year and 20-year -- are being traded.
The central bank has introduced a 'delivery versus payment' (DVP) system aiming to boost transactions of the government securities in the secondary market.
"We've introduced the DVP system to develop the government securities market in Bangladesh," General Manager of the Debt Management Department of the Bangladesh Bank (BB) Mijanur Rahman Joddar told the FE Wednesday.
He also said the new settlement system will come into effect from January 1, 2010.
The central bank has already issued a circular in this connection and asked all commercial banks and financial institutions to follow the DVP system for the government securities transactions.
Under the new system, the central bank will take responsibility of both securities and fund to avoid any counterparty risk.
Currently, the BB transfers fund from the sellers account to buyer bank accounts in case of inter-bank repurchase agreement (repo) and reverse repo.
"We'll play a role of a catalyst to settle the deals of securities on the same day under the new arrangement," another BB official said, adding that the DVP system is essential for improving the country's secondary securities market.
In South Asia, India and Pakistan have already introduced the DVP settlement system to boost the transactions in their secondary markets.
The market operators welcomed the BB's latest move, saying that the new international standard transaction settlement system might help boost the trading of government securities in the secondary market.
"The counterparty settlement risk will be totally removed after introduction of the DVP system that would be able to attract banks, particularly foreign commercial banks, in the secondary market," a senior treasury official of a private commercial bank told the FE.
Currently, three treasury bills (T-bills) are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds -- 5-year, 10-year, 15-year and 20-year -- are being traded.