Progress and Prospect of Bangladesh Money Market and Capital Marketsecurity in Bangladesh

Topics: Bond, Stock market, Mutual fund Pages: 20 (8992 words) Published: April 5, 2013
The Bangladesh economy is within the mainstream of the continuously changing global financialsystem. Domestic as well as international trade also characterizes Bangladesh economy. Hence afinancial system has developed here consisting mainly of the capital and the money market. For any underdevelopment country the existence of a well functioning money market is of  paramount importance. The money market currently existing has also developed due to certainneeds. In general, these needs can be termed as need for short term liquidity within our financialsystem, to carry out the day to day economic activities and obviously to meet and match need for short term lending and borrowing of the participants within the financial system. T-bill market is by far the largest component of the money market in Bangladesh.

Capital markets are essentially about matching the needs of investors with those that need capitalfor development. Bangladesh has no shortage of both such parties, a young and dynamic population that increasingly wants, and is able to, make provision for lifetime events, to save for children’s education, for the possibility of ill health and ultimately for old age and retirement. Onthe other side of the equation, Bangladesh has a pressing need for investment resources to bolster its stretched infrastructure resources, to build more power stations, bridges, ports and gas- pipelines to empower the people in the development of enterprise and the creation of jobs. Debtmarkets are an extremely effective mechanism for matching the long term needs of savers withthose of entrepreneurs. Like emerging -

market countries around the world, Bangladesh could benefit from having a local-currency, fixed -
income securities market. At present, its main fixedincome financial products are bank deposits, bank loans, government savings certificates, termloans, treasury bills, and government bonds and corporate debt (syndicated loans, private placement, and debentures). But in general the corporate debt market is still very small comparedwith the equity market

Money market securities
are the debt securities that have a maturity one year or less. They generally have a relatively highdegree of liquidity. Money market securities tend to have a low expected return but also a lowdegree of risk. Various types of money market securities are listed below

Money MarketSecuritiesIssued byCommonInvestorsCommonMaturitiesSecondaryMarket ActivityTreasury bills FederalGovernmentHouseholds, firmsand financialinstitutions13 weeks, 26weeks. 1 year High Retailcertificates of deposit (CDs)

Banks and savinginstitutionsHouseholds7 days to 5 yearsor longer  Nonexistent Negotiablecertificates of deposit (NCDs)
Large banks andsaving InstitutionsFirms2 weeks to 1 yearModerate Commercialpaper
Bank holdingcompanies, financecompanies andother companiesFirms1 days to 270 daysLow EurodollarDeposit
Banks locatedoutside the countryFirms andgovernment1 day to 1 yearNonexistent Banker’sacceptances
Banks ( exportingfirm can sell theacceptance at adiscount obtainfunds)Firms30 days to 270daysHigh Federal Funds
DepositoryinstitutionsDepositoryinstitutions1 day to 7 daysNonexistent Repurchaseagreements
Firms andfinancialinstitutionsFirms andfinancialinstitutions1 day to 15 daysNonexistent T-Bill Progress in Bangladesh
Bangladesh Bank (BB), the central bank of Bangladesh, operates throughout the country with itsnine branches. Government receipts and payments are overseen and managed byBANGLADESH BANK. Where there is no BANGLADESH BANK branch but transactions of government occur, different branches of Sonali Bank (SB) are assigned to take part in thesetransactions on behalf of BANGLADESH BANK. These branches are known as 'ChestBranches'. In a district, there may be one chest and some sub-chests. BANGLADESH BANK directly monitors Chest branches. This function is known as 'Feed'. The Bangladesh government

finances its expenditures in...
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