BB chief proposes cutting bond issuance fees to spur market growth

Bangladesh Bank governor has proposed reducing bond issuance fees in line with international standards to help the country's bond market flourish.

Currently, issue managers charge 0.5 per cent of funds raised through bonds, and sometimes even less for larger bond sizes. The Bangladesh Securities and Exchange Commission (BSEC) collects Tk 10,000 as a bond application fee and 0.10 per cent of the issue size as a consent fee. In addition, trustee application fee is Tk 50,000, trustee registration fee Tk 100,000, and trustee annual fee Tk 50,000-charged every year until the bonds mature, according to UCB Investment Limited.

"We can review issuance consent fees and trustee annual fees," said Tanzim Alamgir, founding managing director and chief executive officer of the merchant bank.

BB chief Dr. Ahsan H. Mansur made the suggestion in response to findings of the Joint Committee on Bond Market Development. The committee was formed on the instructions of Chief Advisor Prof. Muhammad Yunus to advance the country's bond market.

Last week, the committee-comprising representatives from the Ministry of Finance, Bangladesh Bank, and the BSEC-presented a report titled "Bond Market Development in Bangladesh: Challenges and Policy Recommendations."

The committee emphasised the need for tax incentives to encourage bond subscriptions and attract large funds, such as provident funds, to invest in corporate bonds.

It also highlighted several barriers to bond market development, including easy access to bank loans and higher interest rates on savings certificates. The governor assured at the event that these issues would be addressed.

Among its policy recommendations, the committee suggested limiting bank financing for large corporations. For example, companies with a loan-to-equity ratio exceeding 60 per cent could be required to raise long-term funds through the stock market, with banks restricted to providing loans for a maximum of five years.

Dr. Mansur welcomed the recommendations and stressed the need to reduce both the cost and time of bond issuance through the BSEC.

Stakeholders noted that capital markets can provide sustainable long-term financing, reduce dependency on bank loans, and help mitigate systemic risks

BSEC representatives expressed optimism that, through coordinated and joint efforts, the capital market could emerge as a primary source of long-term financing, supporting both capital market development and the country's overall economic growth.

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