PD banks asked to quote interest rates of securities during auctions
Monday, 27 April 2009
FE Report
The central bank has asked the primary dealer (PD) banks and financial institutions to quote interest rates on securities in tandem with the market trend at the time of primary auctions.
The advice came at a meeting with the chief executives and head of treasury of PD banks and a non-banking financial institution (NBFI) held at the central bank Sunday with its Deputy Governor Ziaul Hassan Siddiqi in the chair.
"We've advised the PDs to quote interest rates on government approved securities considering the overall market behaviour in the primary auction," a senior official of the Bangladesh Bank (BB) told the FE.
He also said the meeting discussed different issues including introduction of 'delivery versus payment' (DVP) system and improvement of the secondary securities market.
The central bank will introduce the DVP system shortly to gear up transactions of the securities in the secondary market.
Under the new settlement system, the BB will take responsibility of both securities and fund to avoid any counterparty risk.
Currently, the central bank transfers fund from the sellers account to buyer bank accounts in case of repurchase agreement (repo) and reverse repo.
Earlier, the central bank selected nine PDs - eight banks and an 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 central bank has asked the primary dealer (PD) banks and financial institutions to quote interest rates on securities in tandem with the market trend at the time of primary auctions.
The advice came at a meeting with the chief executives and head of treasury of PD banks and a non-banking financial institution (NBFI) held at the central bank Sunday with its Deputy Governor Ziaul Hassan Siddiqi in the chair.
"We've advised the PDs to quote interest rates on government approved securities considering the overall market behaviour in the primary auction," a senior official of the Bangladesh Bank (BB) told the FE.
He also said the meeting discussed different issues including introduction of 'delivery versus payment' (DVP) system and improvement of the secondary securities market.
The central bank will introduce the DVP system shortly to gear up transactions of the securities in the secondary market.
Under the new settlement system, the BB will take responsibility of both securities and fund to avoid any counterparty risk.
Currently, the central bank transfers fund from the sellers account to buyer bank accounts in case of repurchase agreement (repo) and reverse repo.
Earlier, the central bank selected nine PDs - eight banks and an 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.