Leave the blame game aside

In the past two years, the Bangladesh capital market expanded geometrically, with the index almost touching the 9000-point mark, but by the end of 2010 the market encountered a series of shocks and continues to remain unstable. Many experts and non-experts have given statements, retracted them at times only to make those statements a little more soothing to the ears, while still engaged in a blame-game that continues to get worse. Who is responsible for the situation; who ought to have been more responsible; who took the wrong step and who could not take a timely step in the right direction? It is true, the market does not move on its own accord, there are forces which propel its movement and there are those who are responsible for the situation today, whether they take that responsibility or not. What can we do to stabilise our capital market? The capital market is necessary for achieving rapid industrial growth. As a nation, we cannot allow our pace of growth to slow down, and certainly cannot afford to allow it to stagnate. This does not mean that the capital market requires excessive preferential treatment. Neither does this mean that it should be given a step-motherly treatment by government organs. The capital market like any other financial institution requires a guardian to implement stable regulations, protecting the market not only from unlawful means but also remaining prepared for accidents and disasters to be able to steer the market properly. This guardian must be sympathetic towards the market in times of need. There has to be strong coordination between regulatory bodies like Bangladesh Bank (BB), the Securities and Exchange Commission (SEC) and the Ministry of Finance (MoF). Considering the size of the market, the SEC should be composed of professionals and must be allowed to work independently. Like a country's independence, its economy also belongs to its people. The concept of single party exposure limit for banks might be re-thought in case of subsidiary. The margin finance rule can be more transparent and accountable - as KYC (know your customer) remains with the lender - the lender has a better knowledge regarding the margin extended to its clients. And auditors should be properly supervised and their fee increased for better services as well as transparency and accountability. The media need to be more responsible, moderating their opinions with greater maturity and restraint. Only experts should be allowed to comment on market trends instead of anchors interested in sound bites. In a sensitive place like the capital market, it is better to have an appropriate spokesperson who on behalf of the government shall disseminate information, concern, or comments to the public. Diversified investment instruments like bonds and index traded funds must be introduced to strengthen the capital market base along with existing equity instruments. Diversification is the future trend of all capital markets, and it must be done if we are to keep up with the world at large. Concepts like, short sale (lending-borrowing) under National Clearing House tagged with Bank, SEC, DSE, CSE, and CDBL can be introduced. The BB may have a capital market stabilisation fund, which will work as a refinancing model to create a win-win situation and certainly a check during unstable trends. For example, in India during the 2008 global financial crisis, the government arranged to provide, in advance, a sum of Rs 250 billion to the banking system under the Debt Waiver and Debt Relief Scheme. We are facing rising instability in the financial and foreign exchange markets. We expect the government's active and expansionary policies to provide the steam to maintain economic performance. The regulatory bodies should be reinforced to be able to work independently and transparently. Openness and free trade hold the key to prosperity, improving competitiveness and productivity. Our nation has the strength to overcome the current challenges if we all rise to the occasion and convert the challenges into an opportunity to establish new highs. This is the time for unity of purpose and resolute actions. The author is the Managing Director & Chief Executive Officer of City Brokerage Limited. ripon.aurora@gmail.com