FE Report (January 24, 2011)
The government should take immediate punitive measurers against the culprits who are behind the recent debacles in the share market, former Bangladesh Bank (BB) governor Salehuddin Ahmed said Sunday.
"Now shares are being traded through automated system. So culprits can be detected easily," the former central bank chief said while speaking at a discussion on monetary policy management and Bangladesh Bank, held at National Press Club.
Economic Reporters' Forum (ERF) organised the discussion as part of its regular activities with its president Monowar Hossain in the chair.
Dr. Ahmed said the recent crash in share market could not take place if necessary actions were taken against the cases filed in connection with the 1996 stock market debacle.
"The government should have properly followed up the 1996 stock market manipulation," he said, adding that the regulators will have to take effective measures to save the financial sector from the adverse impact on stock market crash.
"Our overall financial sector is still behaving well and should persist in the future. Or else, it will create an adverse impact on the national economy," the former governor noted.
Dr. Ahmed blamed regulatory bodies including the central bank of Bangladesh and Securities and Exchange Commission (SEC) for the current crisis in the capital market, saying that decisions should be taken on time to avoid any unwarranted situation.
"If the decisions of the regulatory bodies came out timely, there were good chances to avoid such critical situations in the country's stock market," he said mentioning different decisions relating to the capital market.
Regarding re-fixing of the cash reserve requirement (CRR), he said, "It's an important monetary instrument so that it ought to be revised carefully."
On December 1 last, the central bank raised the CRR by 0.5 percentage points to 6.0 per cent for the commercial banks. The new CRR rules came into effect from December 15.
The former central bank chief sees the country's call money market got volatile in December last following increase in the CRR by the BB.
On December 19 last, the inter-bank call money rate shot up by a record 190 per cent indicating that some commercial banks were facing a big mismatch in their fund position.
"Timing is very import for taking such decisions," he said, adding that the CRR and statutory liquidity ratio (SLR) should not be reviewed frequently.
Dr. Ahmed, however, did not criticise the decisions that were taken for the capital market. He said the decisions were correct, but the timing was not suitable.
He was highly critical of the involvement of the banks in the capital market with depositors' money.
"When the banks gain from the capital market, the profit never goes to the depositors. But, if the banks fail to gain from the capital market, the depositors are to bear the burden," he said.
The central bank earlier identified 11 private commercial banks as they have exceeded the shares' holding as well as exposure limits.
Regarding the over-exposure in the capital market, Dr. Ahmed said the central bank should have warned the banks that it would be made public.
"The regulator gave signals to the banks individually when one or two particular banks were doing something wrong. But it should have been made public," he said, adding that when the index of the capital market was increasing alarmingly the regulatory bodies should have issued a cautionary signal to the banks and other institutions.
Dr. Ahmed recommended that the central bank and the SEC should take more effective measurers to save the country's capital market.
"Both the BB and SEC should work closely," he said, adding that they should sit together each month to review the overall capital market situation.
Criticising the existing pricing method of the initial public offering (IPO), he said Bangladesh is unique in the world where the price at the issuing time is fixed at higher level.
Former deputy governor of the central bank Khondkar Ibrahim Khaled said five commercial banks played 'foul game' in the capital market and one bank borrowed fresh funds from the inter-bank call money market at 190 per cent.
"There is no logic in borrowing money offering such a rate from the call money market," Mr. Khaled, also chairman of Bangladesh Krishi Bank said, adding that the banks will have to pay 6.0 per cent penalty if they failed to maintain the existing CRR rules.
Chairman of Palli Karma-Sahayak Foundation (PKSF) Qazi Kholiquzzaman Ahmad said if the culprits responsible for the present share market debacle could not be brought to book, then the crisis would stage a come back time and again.
Among others, former Vice-President of the Dhaka Stock Exchange (DSE) Ahmed Rashid Lali, Director General of Bangladesh Institute of Bank Management Toufic Ahmad Choudhury, Executive Director of BB Jahangir Alam and ERF General Secretary Abu Kawser also spoke on the occasion.
The government should take immediate punitive measurers against the culprits who are behind the recent debacles in the share market, former Bangladesh Bank (BB) governor Salehuddin Ahmed said Sunday.
"Now shares are being traded through automated system. So culprits can be detected easily," the former central bank chief said while speaking at a discussion on monetary policy management and Bangladesh Bank, held at National Press Club.
Economic Reporters' Forum (ERF) organised the discussion as part of its regular activities with its president Monowar Hossain in the chair.
Dr. Ahmed said the recent crash in share market could not take place if necessary actions were taken against the cases filed in connection with the 1996 stock market debacle.
"The government should have properly followed up the 1996 stock market manipulation," he said, adding that the regulators will have to take effective measures to save the financial sector from the adverse impact on stock market crash.
"Our overall financial sector is still behaving well and should persist in the future. Or else, it will create an adverse impact on the national economy," the former governor noted.
Dr. Ahmed blamed regulatory bodies including the central bank of Bangladesh and Securities and Exchange Commission (SEC) for the current crisis in the capital market, saying that decisions should be taken on time to avoid any unwarranted situation.
"If the decisions of the regulatory bodies came out timely, there were good chances to avoid such critical situations in the country's stock market," he said mentioning different decisions relating to the capital market.
Regarding re-fixing of the cash reserve requirement (CRR), he said, "It's an important monetary instrument so that it ought to be revised carefully."
On December 1 last, the central bank raised the CRR by 0.5 percentage points to 6.0 per cent for the commercial banks. The new CRR rules came into effect from December 15.
The former central bank chief sees the country's call money market got volatile in December last following increase in the CRR by the BB.
On December 19 last, the inter-bank call money rate shot up by a record 190 per cent indicating that some commercial banks were facing a big mismatch in their fund position.
"Timing is very import for taking such decisions," he said, adding that the CRR and statutory liquidity ratio (SLR) should not be reviewed frequently.
Dr. Ahmed, however, did not criticise the decisions that were taken for the capital market. He said the decisions were correct, but the timing was not suitable.
He was highly critical of the involvement of the banks in the capital market with depositors' money.
"When the banks gain from the capital market, the profit never goes to the depositors. But, if the banks fail to gain from the capital market, the depositors are to bear the burden," he said.
The central bank earlier identified 11 private commercial banks as they have exceeded the shares' holding as well as exposure limits.
Regarding the over-exposure in the capital market, Dr. Ahmed said the central bank should have warned the banks that it would be made public.
"The regulator gave signals to the banks individually when one or two particular banks were doing something wrong. But it should have been made public," he said, adding that when the index of the capital market was increasing alarmingly the regulatory bodies should have issued a cautionary signal to the banks and other institutions.
Dr. Ahmed recommended that the central bank and the SEC should take more effective measurers to save the country's capital market.
"Both the BB and SEC should work closely," he said, adding that they should sit together each month to review the overall capital market situation.
Criticising the existing pricing method of the initial public offering (IPO), he said Bangladesh is unique in the world where the price at the issuing time is fixed at higher level.
Former deputy governor of the central bank Khondkar Ibrahim Khaled said five commercial banks played 'foul game' in the capital market and one bank borrowed fresh funds from the inter-bank call money market at 190 per cent.
"There is no logic in borrowing money offering such a rate from the call money market," Mr. Khaled, also chairman of Bangladesh Krishi Bank said, adding that the banks will have to pay 6.0 per cent penalty if they failed to maintain the existing CRR rules.
Chairman of Palli Karma-Sahayak Foundation (PKSF) Qazi Kholiquzzaman Ahmad said if the culprits responsible for the present share market debacle could not be brought to book, then the crisis would stage a come back time and again.
Among others, former Vice-President of the Dhaka Stock Exchange (DSE) Ahmed Rashid Lali, Director General of Bangladesh Institute of Bank Management Toufic Ahmad Choudhury, Executive Director of BB Jahangir Alam and ERF General Secretary Abu Kawser also spoke on the occasion.
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