Central Bank Of Bangladesh To Issue Circular Clarifying Calculation Methods

August 5, 2008 12:20 p.m. EST

Dhaka, Bangladesh (AHN) - The central bank of Bangladesh assured commercial banks on Tuesday that it will issue a circular clarifying government security interest and discount calculation methods.

"We will provide all cooperation to the banks, particularly primary dealers (PDs) to bring dynamism in the country's secondary securities market," a senior Bangladesh Bank (BB) official, told AHN after a meeting with PD bank and financial institution representatives.

The Primary Dealers Association of Bangladesh (PDAB) earlier urged the central bank governor to clarify, omit and amend some points of its rules relating to the 'marking to market system.'

The 'marking-to-market' or 'mark-to-market' system is a process used to calculate the market value of an asset.

On May 26, 2008, BB amended its rules for calculating interest and maturity of government-approved securities allowing an on-cash-basis accounting method instead of the accrual basis.

The official also said BB will issue a master circular clarifying different points of the amended rules in an attempt to boost the secondary securities market.

Under the amendment, banks possessing government-approved securities in the 'held to maturity (HTM)' and 'held for trading (HFT)' forms will be allowed to use the bonds to meet their statutory liquidity requirement (SLR).

Earlier, the banks used to meet their SLR requirement with only HTM bonds.

"We are also trying to bring dynamism in the secondary securities market through creating awareness among the general investors about such market," a senior PDAB member told AHN.

Earlier, BB selected nine PDs - eight banks and a non-banking financial institution (NBFI) - to handle government-approved securities.