Merchant banking licence
Muhammad Ataul Haque | Thursday, 12 March 2009
In the backdrop of an earlier announcement by the Securities and Exchange Commission (SEC) that more licences would be granted for operating merchant banking, a recent meeting of the commission for selection of the prospective licensees proposed by the selection committee ended in fiasco as one member refused to endorse the selections. The reason could be as reported in the media, either according to the member, that the selection process was not transparent or perhaps his choice was not taken into consideration.
But whatever may be the reason, it now appears SEC in the process has totally messed up the entire issue and put the same into uncertainty at least for the time being. Although SEC is the sole authority in deciding who would get the licence, yet the whole process of selection should be a transparent one and in a democratic society like ours the public has a right to know the deciding factors and the criteria.
Otherwise if the selection is left to the selectors alone, there is every possibility of anybody smelling rat in the selection process of the so-called selection team.
Granting of such licence to the state-owned bankers also give rise to various speculations. The eye-brows are now raised whereas those banks who could not even manage their normal banking activities as per norms set by the Bangladesh Bank, how they would fare by taking this additional responsibility is now anybody's guess.
Certainly more private enterprises, particularly the financial institutions (FIs) should have been given preference. In fact all the FIs and the private commercial banks should be considered for issuing the licence.
SEC which has emerged as a purely bureaucratic institution has made so many rigid rules and regulations, granted licences to a few, the basis of which was never known, but its achievement in developing a vibrant capital market is a big zero over the period of thirty eight years since independence. Only the bureaucracy prevailed and the achievement was almost nil.
The SEC is now regulating a capital market which is still in its infancy and limping since its inception. What is the harm if all the financial institutions who are special financial service-providers having a large number of professionals at their disposal, and who are licensed by the Bangladesh Bank, are issued with merchant banking licenses. They are fully capable of handling the business better than anybody else. What SEC needs to do is to set basic bare minimum requirements to become a merchant banker and anybody fulfilling those requirements could apply for the license, thus avoiding those selection processes and controversial committees on which public generally does not have any faith.
The conditions, however, must not be very rigid rather should be very simple. They may also consider raising of the licence fees to augment their income and set a competitive performance standard for the licence-holders based on the average initial public offering (IPO) issuance in the country in a year. In an emerging economy like ours, any kind of rigid rules and regulations will certainly discourage healthy growth of such financial service providers. Therefore, a flexible approach will really help development of capital market and not the existing bureaucratic tangle in which SEC is now caught.
The writer can be reached at
E-mail: [email protected]
But whatever may be the reason, it now appears SEC in the process has totally messed up the entire issue and put the same into uncertainty at least for the time being. Although SEC is the sole authority in deciding who would get the licence, yet the whole process of selection should be a transparent one and in a democratic society like ours the public has a right to know the deciding factors and the criteria.
Otherwise if the selection is left to the selectors alone, there is every possibility of anybody smelling rat in the selection process of the so-called selection team.
Granting of such licence to the state-owned bankers also give rise to various speculations. The eye-brows are now raised whereas those banks who could not even manage their normal banking activities as per norms set by the Bangladesh Bank, how they would fare by taking this additional responsibility is now anybody's guess.
Certainly more private enterprises, particularly the financial institutions (FIs) should have been given preference. In fact all the FIs and the private commercial banks should be considered for issuing the licence.
SEC which has emerged as a purely bureaucratic institution has made so many rigid rules and regulations, granted licences to a few, the basis of which was never known, but its achievement in developing a vibrant capital market is a big zero over the period of thirty eight years since independence. Only the bureaucracy prevailed and the achievement was almost nil.
The SEC is now regulating a capital market which is still in its infancy and limping since its inception. What is the harm if all the financial institutions who are special financial service-providers having a large number of professionals at their disposal, and who are licensed by the Bangladesh Bank, are issued with merchant banking licenses. They are fully capable of handling the business better than anybody else. What SEC needs to do is to set basic bare minimum requirements to become a merchant banker and anybody fulfilling those requirements could apply for the license, thus avoiding those selection processes and controversial committees on which public generally does not have any faith.
The conditions, however, must not be very rigid rather should be very simple. They may also consider raising of the licence fees to augment their income and set a competitive performance standard for the licence-holders based on the average initial public offering (IPO) issuance in the country in a year. In an emerging economy like ours, any kind of rigid rules and regulations will certainly discourage healthy growth of such financial service providers. Therefore, a flexible approach will really help development of capital market and not the existing bureaucratic tangle in which SEC is now caught.
The writer can be reached at
E-mail: [email protected]