For all latest news, follow The Financial Express Google News channel.
Bangladesh Bank (BB) Governor Dr Ahsan H Mansur today (Monday) laid emphasis on stricter regulation and stronger enforcement to restore confidence of investors for the development of Bangladesh's corporate bond market.
“Weak enforcement of rules has significantly eroded investor confidence in the bond market,” he said while speaking at a seminar titled "Bond Market Development in Bangladesh: Challenges and Recommendations", jointly organised by the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) in the city, BSS reports.
He said that in developed markets abroad, if a corporate issuer fails to repay even a single coupon, it is treated as a serious default.
"But in our country, there is hardly any consequence if a company fails to pay bond coupons. No one seems to care."
The governor said restoring trust would require strict regulatory measures and effective supervision to protect investors.
As a push factor to energise the bond market, Mansur said the central bank may discourage excessive dependence on bank loans.
"If a company or group approaches banks for loans beyond the single borrower exposure limit, we may suggest that they raise funds from the capital market through bonds or shares instead," he said.
He also highlighted several pull factors to attract corporate issuers, including tax incentives, reduced bond issuance time and lower costs.
"To develop the bond market, the government and business community must take the lead," he added.
Mansur further said a central committee, along with several sub-committees, should be formed to improve coordination among regulators.
The main committee would supervise and guide the work of the sub-committees to ensure effective implementation.
BSEC Chairman Khondoker Rashed Maqsood said bank loans remain easier to obtain than capital market financing in Bangladesh.
Non-performing loans are high mainly due to mismatches between loan tenure and funding sources, he added.
"Our concept note recommends encouraging companies as well as government to go to the capital market. After receiving stakeholder feedback, we will finalise regulations related to the bond market," he said.
Finance Secretary Khairuzzaman Mozumder said that although the issue of double taxation has been resolved, new challenges have emerged in secondary bond trading due to frequent changes in ownership.
"These taxation issues cannot be solved at every stage manually; it is likely a software-related problem," he said, adding that coordination between the National Board of Revenue (NBR) and BSEC is needed.
He also said the government is working to attract foreign investors to local currency bonds and has formed a committee to introduce secondary trading of savings certificates.