International Monetary FundWorld Bank2017-08-102017-08-102010-11https://hdl.handle.net/10986/27735The capital markets in Salvador are small and relatively underdeveloped, and have played a very limited role in the economy. On average, institutional investors invest less than 10 percent of their total assets in capital market instruments. In 2009, there were only five new issuances of corporate bonds and three in the case of equity. Banks and pension funds are the main institutional investors. The current market architecture and the natural monopoly it grants to the exchange hamper market development and prevent the modernization of the regulatory framework. There is an urgent need to overhaul of the regulatory framework to promote sound market development in the short-to-medium term. The regulatory framework should guarantee a level playing field between bonds and bank deposits, which should be reflected in the investment guidelines for institutional investors. The exchange should reposition itself to become more competitive and strategic at the local and regional level. The investment funds law should be finally approved to broaden and diversify the investor base. The importance of this reform is paramount as the current reliance on just two main institutional investors (banks and pension funds), with investment limitations (35 percent each per issue), creates a major limitation for new issuances. In the medium -to long- run, it is recommended to explore gradually integrating the individual markets at the regional level. This paper is divided into following four parts: part one gives current market situation; part two gives regulatory and supervisory framework; part three gives recommendations; and part four is reference section.en-USCC BY 3.0 IGOACCOUNTINGARBITRAGEASSET-BACKED SECURITIESAUCTIONAUCTIONSBALANCE SHEETBANK ASSETSBANK DEPOSITSBANKING ASSETSBANKING REGULATIONSBANKING SECTORBOND INSTRUMENTSBOND MARKETSBOOK ENTRYBOOK-ENTRYBORROWING COSTSBROKERAGEBROKERAGE FIRMBROKERAGE FIRMSBROKERAGE HOUSEBROKERAGE HOUSESBROKERAGESBROKERSCAPITAL MARKETCAPITAL MARKET DEVELOPMENTCAPITAL MARKETSCENTRAL BANKCENTRAL BANKSCENTRAL DEPOSITORYCOLLECTIVE INVESTMENTCOMMERCIAL CODECOMMON TRADING PLATFORMCOMPARABLE MATURITYCONFLICTS OF INTERESTCONSUMER PROTECTIONCORPORATE BONDCORPORATE BOND ISSUESCORPORATE BOND MARKETCORPORATE BOND MARKET DEVELOPMENTCORPORATE BONDSCORPORATE GOVERNANCECOUPONDEBT CONTRACTDEBT INSTRUMENTSDEBT ISSUERSDEBT MARKET CONSTRAINTSDEBT MARKET DEVELOPMENTDEBT SECURITIESDEBT TRANSACTIONDEBT TRANSACTIONSDECENTRALIZATIONDEMAND FOR BONDDEPOSITDEPOSIT LIABILITIESDEPOSITSDEVELOPMENT BANKDISCLOSURE REQUIREMENTSDOMESTIC BANKSDOMESTIC DEBTDOMESTIC DEBT MARKETDOMESTIC GOVERNMENT BONDSDOMESTIC INSTITUTIONAL INVESTORSDOMESTIC MARKETDOMESTIC SECURITIESEMERGING MARKETSEQUITY ISSUANCEEQUITY MARKETEQUITY MARKETSEURO MARKETEXPENDITUREEXTERNAL DEBTFINANCIAL INSTITUTIONSFINANCIAL INSTRUMENTSFINANCIAL SECTORFINANCIAL SYSTEMFINANCIAL SYSTEMSFISCAL POLICYFIXED INCOMEFIXED INCOME MARKETFOREIGN DEBTFOREIGN EXCHANGESFOREIGN INSTRUMENTSFOREIGN INVESTMENTFUND MANAGEMENTFUND MANAGERSGOVERNANCE STANDARDSGOVERNMENT BONDSGOVERNMENT FINANCINGGOVERNMENT INTERVENTIONGOVERNMENT REVENUESGOVERNMENT SECURITIESGOVERNMENT SECURITIES MARKETGROSS DOMESTIC PRODUCTGROSS SETTLEMENT SYSTEMHOLDINGHOLDINGSINDEBTEDNESSINITIAL PUBLIC OFFERINGINITIAL PUBLIC OFFERINGSINSTITUTIONAL INVESTORSINSURANCEINSURANCE COMPANIESINSURANCE COMPANYINSURANCE PREMIUMSINTERNATIONAL BANKINTERNATIONAL MARKETSINTERNATIONAL STANDARDSINVESTINGINVESTMENT FUNDINVESTMENT FUNDSINVESTMENT GUIDELINESINVESTMENT STRATEGIESINVESTMENT VEHICLESINVESTOR BASEIPOISSUANCEISSUANCESJOINT STOCK COMPANIESLEGAL FRAMEWORKLEVEL PLAYING FIELDLIQUIDATIONLIQUIDITYLIQUIDITY MANAGEMENTLOANLOCAL CAPITAL MARKETLOCAL DEBTLOCAL DEBT MARKETLOCAL MARKETLONG- TERM YIELDMARKET FRAGMENTATIONMARKET INFRASTRUCTUREMARKET INSTRUMENTMARKET INSTRUMENTSMARKET INTEGRATIONMARKET INTERMEDIARIESMARKET SIZEMATURITIESMATURITYMONETARY FUNDMONETARY POLICYMUTUAL FUNDMUTUAL FUND ASSETSMUTUAL FUND INDUSTRYMUTUAL FUNDSOUTSTANDING CORPORATE BONDOWNERSHIP STRUCTUREPENSIONPENSION FUNDPENSION FUND ASSETSPENSION FUNDSPENSION SYSTEMPENSIONSPORTFOLIOPORTFOLIO MANAGEMENTPORTFOLIOSPRICE DISCOVERYPRIMARY MARKETPRINCIPAL PAYMENTSPRIVATE DEBTPRIVATE DEBT MARKETSPRIVATE PLACEMENTSPRIVATE SECTOR DEVELOPMENTPUBLIC DEBTPUBLIC DEBT MANAGEMENTPUBLIC DEBT MARKETPUBLIC DEBT MARKETSPUBLIC DEBT SECURITIESPUBLIC PENSIONREAL TIME GROSS SETTLEMENTREGIONAL INTEGRATIONREGISTRATION PROCESSREGISTRATION PROCESSESREGULATORY FRAMEWORKREGULATORY FRAMEWORKSREGULATORY STRUCTUREREMITTANCESREPOREPO MARKETSREPO TRANSACTIONSRESERVESSECONDARY MARKETSECONDARY MARKET TRANSACTIONSSECURITIESSECURITIES EXCHANGESECURITIES EXCHANGESSECURITIES LAWSECURITIES MARKETSECURITIES MARKETSSETTLEMENTSETTLEMENT INFRASTRUCTURESETTLEMENT SYSTEMSSHAREHOLDERSSMALL INVESTORSSOVEREIGN YIELDSTOCK EXCHANGESTOCK EXCHANGESSTOCK MARKETSTOCK MARKET CAPITALIZATIONSTOCKST-BILLTAXTAX REGIMETRADINGTRADING SYSTEMSTRANSPARENCYTREASURYTREASURY BILLSTREASURY CREDITTRUST FUNDTRUST FUNDSTURNOVERUNIFORM-PRICEVALUATIONVALUATION OF SECURITIESYIELD CURVEReportWorld Bank10.1596/27735