World Bank2013-02-152013-02-152011-06https://hdl.handle.net/10986/12365The Bangladesh stock market experienced significant volatility in late 2010 and early 2011 which took stock values high above fundamentals and threatened the stability of the financial system. This note takes a systematic look at the capital markets underpinnings in Bangladesh, including the regulatory framework, the rule-making bodies and enforcement issues. It also addresses systemic weaknesses responsible for market instability which was observed at the end of 2010 and early 2011. The note analyses the outlines specific areas of potential vulnerabilities of securities markets, as assessed against appropriate practice guidelines for stability, sustainability, transparency, and enforcement. A plan of action going forward is also suggested. This note draws on a considerable amount of prior analytical work. Bangladesh capital markets remain ineffective. The government debt securities markets are illiquid preventing the Bangladesh financial system from relying on a market-based yield curve. Bangladesh has yet to develop an active money market. Trading of treasury bills in the secondary market is limited because these instruments, along with treasury bonds, make up the statutory liquidity reserve and are therefore generally held until maturity by commercial banks and other financial institutions. Trading is also thin in repurchase agreements, for two main reasons. First, commercial banks have a weak treasury function, and most do not actively manage liquidity. Second, there is no standard master repurchase agreement, a gap that should be addressed to support orderly development of the repo market.en-USCC BY 3.0 IGOACCOUNTINGACCOUNTING STANDARDSASSET CLASSIFICATIONAUCTIONSBANKING INSTITUTIONSBANKING LAWBANKING REGULATIONBANKING SECTORBANKING SECTOR ASSETSBENCHMARK BONDSBONDBOND ISSUANCEBOND ISSUESBOND MARKETBOND MARKETSBONDSBOOK ENTRYBRANCH NETWORKSBROKERAGEBROKERAGESBROKERSCAPITAL MARKETCAPITAL MARKET ACTIVITIESCAPITAL MARKET DEVELOPMENTCAPITAL MARKETSCAPITAL MARKETS REGULATORSCAPTIVE INVESTORSCDSCENTRAL BANKCENTRAL DEPOSITORYCENTRAL DEPOSITORY SYSTEMCHECK CLEARINGCOMMERCIAL BANKCOMMERCIAL BANK BRANCHESCOMMERCIAL BANKINGCOMMERCIAL BANKSCOMMERCIAL PAPERCOMMERCIAL PAPER MARKETCOMMON LAWCONFLICT OF INTERESTCONSUMER PRICE INDEXCORPORATE BONDCORPORATE BOND MARKETCORPORATE BOND MARKETSCORPORATE BONDSCORPORATE BORROWERSCORPORATE DEBTCORPORATE GOVERNANCECREDIT RATINGCREDIT RATING AGENCIESCURRENT ACCOUNT SURPLUSDEBENTUREDEBENTURE HOLDERSDEBENTURESDEBT INSTRUMENTSDEBT OUTSTANDINGDEBT SECURITIES MARKETSDEMAND FOR GOVERNMENT SECURITIESDEPOSITDEPOSITSDEVELOPMENT BANKENFORCEMENT POWERSEQUITIESEQUITY MARKETEXCESS LIQUIDITYEXCHANGE COMMISSIONFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL MARKETSFINANCIAL STABILITYFINANCIAL SYSTEMFISCAL DEFICITFOREIGN BANKSFOREIGN CURRENCYFOREIGN EXCHANGEFOREIGN EXCHANGE RESERVESFOREIGN INVESTORSGOVERNMENT BONDSGOVERNMENT BORROWINGGOVERNMENT DEBTGOVERNMENT DEBT MARKETGOVERNMENT DEBT SECURITIESGOVERNMENT FUNDINGGOVERNMENT SECURITIESHOLDINGSHUMAN DEVELOPMENTINCOME RECOGNITIONINFLATIONINFLATIONARY PRESSURESINFRASTRUCTURE BONDSINSIDER TRADINGINSTITUTIONAL INVESTORINSTITUTIONAL INVESTORSINSTRUMENTINSURANCEINSURANCE COMPANIESINSURANCE CORPORATIONINSURANCE INDUSTRYINSURANCE PENETRATIONINTEREST RATEINTEREST RATE RISKINTERNATIONAL STANDARDSINVESTINGINVESTMENT CORPORATIONINVESTMENT FUNDSINVESTMENT INSTRUMENTINVESTMENT INSTRUMENTSINVESTMENT POLICYINVESTMENT RESTRICTIONSINVESTOR BASEINVESTOR DEMANDINVESTORS IN GOVERNMENT SECURITIESISLAMIC BANKSISLAMIC BONDLEGAL AUTHORITYLEGAL FRAMEWORKLENDERSLIFE INSURANCELIFE INSURANCE COMPANIESLIQUIDITYLIQUIDITY MANAGEMENTLIQUIDITY POSITIONLOANLONG-TERM DEBTMALFEASANCEMARKET CAPITALIZATIONMARKET DISTORTIONSMARKET INSTABILITYMARKET REGULATORSMATURITIESMATURITYMICROCREDITMICROFINANCEMICROFINANCE INSTITUTIONSMINIMUM CAPITAL REQUIREMENTSMONETARY POLICYMONEY MARKETMUTUAL FUNDMUTUAL FUND INDUSTRYMUTUAL FUNDSNATIONAL INVESTMENTNATIONAL SAVINGSNON-PERFORMING LOANSOUTSTANDING AMOUNTSPENSIONPENSION FUNDPENSIONSPOST OFFICEPRIMARY MARKETPRIMARY MARKETSPRIVATE BANKSPRIVATE BONDPRIVATE BONDSPRIVATE DEBTPRIVATE DEBT MARKETSPRIVATE INVESTMENTPRIVATE PLACEMENTSPRODUCTIVE INVESTMENTPRUDENTIAL REGULATIONSPUBLIC INVESTMENTREGISTRATION FEEREGISTRATION FEESREGULATORY CAPACITYREGULATORY FRAMEWORKREGULATORY STRUCTUREREMITTANCEREMITTANCESREPOREPO FACILITYREPO MARKETREPOSRESERVERESERVE REQUIREMENTSRETAIL INVESTORSRETURNSREVERSE REPO TRANSACTIONSRISK MANAGEMENTSAVINGS CERTIFICATESSECONDARY MARKETSECONDARY MARKET TRADINGSECONDARY MARKETSSECURITIESSECURITIES MARKETSSECURITIES REGULATIONSECURITIES TRANSACTIONSSETTLEMENTSETTLEMENT SYSTEMSSHAREHOLDERSHAREHOLDERSSMALL INVESTORSSOVEREIGN GUARANTEESTAMP DUTIESSTATUTORY LIQUIDITYSTOCK EXCHANGESTOCK EXCHANGESSTOCK MARKETSTOCK MARKET PRICESSTOCK MARKET VOLATILITYSTOCKSSURPLUS LIQUIDITYT-BILLT-BILLST-BONDSTAXTRADING SYSTEMTRANSACTIONTRANSFER OF SECURITIESTRANSPARENCYTREASURYTREASURY BILLSTREASURY BONDSTRUSTEETRUSTEESTURNOVERUNDERWRITERSYIELD CURVEWorld Bank10.1596/12365