Chapter 5siteresources.worldbank.org/PSGLP/Resources/chap5.pdf · 138 Bangladesh Bank Annual...

Chapter 5

Financial Market Governance Infrastructure

170

136 This section has been prepared by Md. Ezazul Islam, Research Economist.137 Financial Sector Assessment, Handbook, World Bank and IMF publication, September 2005

5.1 The Overall Regulatory Framework for the Financial Sector 136

The financial system of Bangladesh consists of Bangladesh Bank as the central bank, commercial banks, development financial institutions, financial institutions, insurance companies, capital market, cooperative banks and micro finance institutions. The legal infrastructure plays a pivotal role in the operation of financial markets as well as in the efficient intermediation of capital flows and domestic savings. Legal framework empowering and governing the regulator and the rules used to regulate the various markets and institutional types form the cornerstone of the orderly functioning and development of the financial system.137

The different agencies regulate the financial system of the country. Particularly, the BB regulates banks and financial institutions; SEC regulates the securities market, and the Ministry of Commerce (i.e., via the office of the Controller of Insurance) regulates insurance companies under their respective legal frameworks. To create an efficient environment in the financial system of the county, the respective authorities had already taken several initiatives in the legal, institutional and policy reforms areas since the 1990s.

(a) Bangladesh Bank’s Role

Bangladesh Bank mainly regulates and supervises extensively 48 Banks and 28 financial institutes in the Banking systems. As on March 2006, the number of total Bank’s branches in the banking system reached 6412. Of which, NCBs, had 3386 branches, SBs, 1342 branches, PCBs ( including IBs) 1643 branches, and FCBs 41 branches. Bangladesh Bank was given regulatory power by the Bangladesh Bank Order 1972 and the Bank Company Act. In order to provide greater operational and policy autonomy to the Bangladesh Bank, amendments to Bangladesh Bank Order 1972, Bangladesh Banks (Nationalization) Order 1972 and the Bank Company Act 1991 were approved by the parliament in 2003 . The

Chapter 5 (Continued)

171

138 Bangladesh Bank Annual Report, 2004-2005, Chap. 5 and BB quarterly Report, October-December, 2004, Volume II, No. 2

amended Bangladesh Bank Order redefined central banks functions in a more focused way, by giving the Bangladesh Bank enhanced authority and make it accountable for its performance. Bangladesh Banks (Nationalization) Order has been amended with a view to improving the governance of NCBs. Amendments to the Bank Company Act 1991 give Bangladesh Bank more authority and increased powers to regulate and supervise the banking sector. Besides, a new Financial (Money) Loan Court Act 2003 enacted to provide for speedy procedures for obtaining decrees and execution. Provision has been made for Alternative Dispute Resolution to ensure early settlement of disputes through settlement conference and negotiation. Money Laundering Prevention Act 2002 was enacted in April 2002 . For proper compliance of the provisions of the Money Laundering Prevention Act 2002, the Bangladesh Bank has made ‘Know Your Client’ (KYC) mandatory for all banks and financial institutions and asked them to preserve correct and full information of their customers and all transactions in each account and control and report any unusual/suspicious transactions. A draft Money Laundering Prevention Act 2006 has been submitted for approval.

To monitor closely money laundering and illegal financing and preventing these activities, Bangladesh Bank has instructed all commercial banks to report STR in a modified format. Further, Bangladesh Bank has instructed all commercial banks to submit CTR of both deposit and withdrawal amounts of BDT 0.5 million or above in a single account after reviewing daily transactions in the prescribed format effective from January 01, 2006. As per this instruction, commercial banks have been submitting the STR and CTR on a regular basis to BB. Besides, BB randomly inspects commercial bank’s unusual cash transactions (CT). Recently, FIU has been set up at Anti Money Laundering Department of BB to detect and investigate financial crime in the banking system of Bangladesh.

In the backdrop of the emergence of a large volume of NPL since the nationalization of commercial banks in the country, a full-fledged CIB was set up in August 18, 1992 within Bangladesh Bank itself under the FSRP of the World Bank.138 The main objective behind the setting up of the CIB was to minimize the extent of further loan default by facilitating the banks and financial institutions with credit reports of the loan applicants so that the lending institutions have more completed information while extending any lending or rescheduling facility. To improve the credit risk, the database of the CIB consists of detailed credit information supplied by lending institutions. The performance of CIB in fulfilling the objectives of bringing


172

down the extent of default loan has been found quite remarkable. As reviewed in chapter 3 above, the volume of loans have continued decline steadily.

With a view to further strengthening the prudential supervision and regulation, Bangladesh Bank has also made additional institutional reforms. These include introduction of new loan ledger and International Accounting Standard (IAS-30) for scheduled banks and strengthening both offsite onsite supervision of the BB are worth mentioning. Moreover, Bangladesh Bank has undertaken a project named ‘Central Bank Strengthening Project (CBSP)’ with the financial assistance of IDA. The main purpose of this project is to strengthen the Bank’s operational capacity to formulate monetary policies and regulatory supervision for the financial sector.

Along with legal and institutional reforms, Bangladesh Bank has also made some important policy changes as part of the Financial Sector Reform Program since 1990s. Below we review for recent progress in the implementation of these measures. These policy changes have already become dominant tools for achieving macroeconomic stability and improve the efficiency of the money market. These policies are as follows:

(i) Policy for Loan Classification & Provisioning

In order to simplify loan classification and provisioning, prudent policies on loan classification and provisioning were taken. Measures have been taken to strengthen the credit discipline and the process of classification has been simplified. In order to strengthen credit discipline and bring classification gradually in line with the international standards, it has been decided that with effect from March 3, 2005: a continuous credit, demand loan or a term loan which will remain overdue for a period of 90 days or more will be put in to ‘Special Mention Account’ and interest rate accrued on such loan will be credited to Interest Suspension Account instead of crediting the same to the Income Account. Loans in the ‘Special Mention Account’ will not be treated as defaulted loan for the purpose of section 27ka (3) of the Banking Company Act 1991 and the status of loan (Special loan) need not be reported to the CIB. This helps the banks to look at accounts with potential problems in focused manner. These measures are believed to have contributed the performance in reducing non performing loan as cited above.

(ii) Capital Adequacy

Chapter 3 described in details the policy on capital adequacy. Capital adequacy threshold for banks has been raised from 8 percent to 9 percent of risk-weighted assets, and core capital requirement has also been raised from 4.0 percent to 4.5 percent, to be attained by June 2003. The


173

139 The present rating system will be replaced by the CAMELS (Capital Adequacy, Asset Quality, Management, Earnings and Liquidity and Sensitivity to market risk) effective from June 2006.

minimum capital requirement for banks has been raised to BDT 1.0 billion, following passing of the Bank Company Act 2003. Banks were instructed had to meet at least 50 of the shortfall by 09 March 2004 and rest by 9 March 2005. Latest data indicates that risk weighted asset ratio of all banks stood at 7.30 percent at the end of December 2005. Bangladesh Bank has singed Memorandum of Understanding (MOU) with banks to meet the shortfall.

(iii) CAMEL Rating

To measure the performance of the banking sector, CAMEL (Capital Adequacy, Asset Quality, Management, Earnings and Liquidity) rating system has been introduced for scheduled banks.139 Presently, Bangladesh bank has employed Early Warning Systems (EWS) of supervision to address the difficulties faced by the banks. As of end 2004, CAMEL rating of 12 banks was 1 or strong; 15 banks were rated 2 or satisfactory; rating of 10 banks was 3 or fair; 8 were rated 4 or marginal and 4 got unsatisfactory rating. Bangladesh banks give suggestion and advices poor rating banks under the MOU arrangement.

(iv) Risk Management Systems

Bangladesh Bank has launched a project to review the global best practices in this area and assess the possibility of introducing them in the banking sector of Bangladesh. The five ‘core’ risk areas of banking are: (i) Credit Risks; (ii) Asset and Liability/Balance Sheet Risks; (iii) Foreign Exchange Risks; (iv) Internal Control and Compliance Risks; and (v) Money Laundering Risks. Accordingly banks have started risk management.

(v) Fit-and-Proper Test Criteria

Fit-and-Proper’ Test Criteria introduced by the BB for approving appointments of chief executives and advisors of private banks have been tightened, towards ensuring more efficient professional management of banks.

(b) Securities and Exchange Commission

In order to regulate capital and non-bank financial markets efficiently, the Securities and Exchange Commission Act 1993 was promulgated in 1993 and the SEC was established. These were the major developments in the regulation of non-bank financial market during the 1990s. This lead to the creation of an exclusive and specialized regulatory body in which powers


174

under the Capital Issues Act and Securities and Exchange Ordinance were merged. Another significant development in 1993 was the promulgation of the Financial Institutions Act which provided regulatory framework for Non-Bank Financial Institution under the BB.

In view of overlapping of jurisdiction of the SEC and BB, the two organizations have signed a memorandum of understanding to improve coordination. This memorandum delineates the areas of jurisdiction of the two organizations and has helped in resolving most ambiguities. According to the memorandum, the SEC exercising powers under the Securities and Exchange Commission Act-1993 regulates institutions engaged in capital market activities, while the BB, exercising powers under the Financial Institutions Act and Regulations, regulates those entities engaged in financing activities including leasing companies and venture capital companies.

The regulatory framework designed by the SEC is primarily intended to ensure equitable treatment of the investors, disclosure by all market actors ( the issuers, stock brokers and dealer, stock exchange, merchant bankers and other intermediaries) and adherence to aspects of business ethics.

(c) Insurance

The insurance companies, the faster growing sector in the financial market are regulated by the office of CCI under the Ministry of Commerce. The regulatory power of CCI was set up as per the Insurance Act of 1938. After independence of Bangladesh, this law was adopted in Bangladesh as per President Order No. 19 of 1972. The nationalization of insurance industry was effected by another declaration of the President Order No 95 promulgated on 8th August, 1972 which is known as the Bangladesh Insurance (Nationalization) Order 1972. To regulate properly and bring dynamism in the insurance market, The Insurance Corporation (Amendment) Act 1990 and The Insurance (Amendment) Act 1990 were made.

(d) Micro Finance

MFIs intermediate financial services in the absence of a formal regulatory legal framework. Considering the need to develop an appropriate regulatory and supervisory system for this sector the Government established a unit named ‘Micro Finance Research and Reference Unit' (MRRU) in the Bangladesh Bank. The National Steering Committee under the Chairmanship of Governor of Bangladesh Bank looks after the various functions of the unit. The committee is also responsible for formulating a uniform guideline and


175

140 Prepared by Dr. Md. Habibur Rahman, Senior Research Economist drawing heavily on Beck and Rahman (2006).

the legal framework of a regulatory body for this rapidly growing financial sector. The draft regulatory document was approved by the cabinet and now it is waiting to be passed by the parliament.

5.2 The Contractual Framework 140

The contractual framework is one of the important building blocks for a stable, sound and effective financial system which, in general, deals with the rights of creditors, shareholders, contract enforcement, corporate governance as well as the informational framework. In spite of some promising reforms and progress in macroeconomic stability, building the contractual and informational framework in Bangladesh still has a long way to go. By definition financial contracts consist of an exchange of money today for the promise of money tomorrow and very much sensitive to the uncertain future. In this regard, Beck and Rahman (2006) notes that the intertemporal nature of the financial contract and several market frictions make financial contracts critically different from other contracts in a market-based economy. Financial contracts depend on the certainty of legal rights of borrowers, creditors and outside investors and the predictability and speed of their fair and impartial enforcement.

On the other hand, market frictions because of asymmetric information problem and weak infrastructure prevent the costless enforcement of contracts, again increasing incentives for borrowers to deviate from contracted promises. With a view to facilitating the participants overcome market frictions, the government has an active role to play in providing the “infrastructure” for financial service provision, i.e., the rules within which firms and household contract with each other and perform financial transactions. Besides, an effective legal system is also critical for a stable, sound and dynamically evolving financial system that ensures timely, efficient and impartial enforcement of the rights of creditors as well as borrowers. It has been shown in Beck and Rahman (2006) that there is a positive relationship between ‘creditor rights’ and ‘private credit share to GDP’, a negative relationship between ‘the time period it takes to enforce contracts’ and ‘private credit share to GDP’ and a positive relationship between ‘better protection of minority shareholder rights’ and ‘the market capitalization in stock markets’.

Since the inception of FSRP in early 1990, Bangladesh has made significant progress in the contractual framework, but still there is a significant room for improvement. It has also been noted in Beck and Rahman (2006) that


176

141 Note that Ease of Doing Business Indicator is a survey based ranking produced by Deep Customer Connections, Inc. by asking how does the carrier-agency relationship affect the buying decision? More pointedly, how does the ease-or difficulty-of doing business with a carrier affect the agent's decision of whether to place more or less of their business with that carrier?142 Prepared by Dr. Akhtaruzzaman, Senior Research Economist and Shubhasish Barua, Research Economist.

while the creditor and minority shareholder rights are relatively strong on the book, the enforcement is weak. Lenders and borrowers have to deal with an ineffective collateral system for movable and immovable assets. Land titling is hampered by poor and unreliable records, high fees, and fraud. The bankruptcy legislation is rarely used in practice as a tool to resolve corporate distress, with less than half of the cases in the two bankruptcy courts actually being declared bankrupt at the end of the process. While some progress has been made with the recent introduction of the money loan courts that allow a faster and less bureaucratic enforcement of claims, it is still too early to say whether this reform has significantly impacted the availability and cost of loans. Further, appeals to the high court still pose a major bottleneck to the quick resolution of claim resolution as they are to wait in queue with other cases. The deficiencies in the contractual framework are reflected in cross-country benchmarking. Bangladesh is ranked 65th in the Ease of Doing Business Indicator (out of 155), a rank that is driven by deficiencies in the conditions for registering property where Bangladesh ranked 151st. Bangladesh is ranked 75th in enforcing contracts and 77th in closing a business.141

5.3 Remittances: Governance and Infrastructure Issues 142

During the last fifteen years the flow of worker’s remittances has increased steadily and contributed a major source of foreign exchange earnings of the country. There has been a steady rise in remittance-GDP ratio since

05

101520253035404550

FY9

1

FY9

2

FY9

3

FY9

4

FY9

5

FY9

6

FY9

7

FY9

8

FY9

9

FY0

0

FY0

1

FY0

2

FY0

3

FY0

4

FY0

5

Rem

ittance

/Exp

ort

, Im

port

0

1

2

3

4

5

6

7Re

mitt

ance

/GD

P

Remittance/GDP Remittances/Export Remittances/Import

Figure 5.3.1Remittances as percentage of GDP, Imports (c.i.f.) and Exports (f.o.b.)


177

143 Average worker's remittances as a percentage of total foreign exchange earnings increased from 21.5 percent in FY 98-2001 to 28.1 in FY02-051, while the share of export earnings reduced to 68.9 percent to 63.5 percent in the same period.

1991 except for some moderate fluctuations. The ratio increased to 6.41 percent of GDP in FY05 from 2.41 percent in FY91. Contribution of remittances in building up the foreign exchange reserves received a boost during FY02 as the increasing trend of remittances experienced an upward shift; the ratio of remittances to import jumped from 20.16 in FY01 to 29.32 in FY02, and has remained stable since then.143

Progress made to date in simplifying the administrative procedures and reforming the legal system of remitting hard-earned foreign currencies via official channels and also the introduction of various incentives have plausibly influenced the increased flow of remittances during the period. Though the flow of worker’s remittances has been substantial in restoring the foreign exchange reserves of the country, the level of reserves is still well below the level that could stabilize the pressure in the foreign exchange market.

One of the important sources of vulnerabilities in the growth of remittance inflows in a developing country context is the trend of growing shares of un-official or unrecorded remittance inflows (especially by Hundi). As an alternative source of remittances transfer, the hundi system has grown in stature over time, and is believed to exert a negative impact on the growth of remittance inflows in the official channel. The situation is properly reflected in two major studies conducted by international organizations. One by IMF reveals that during 1981-2000, total recorded and estimated unrecorded private transfers to Bangladesh stood at USD 34.5 billion and USD 49.6 billion respectively, suggesting that the share of unrecorded private transfers to Bangladesh were 59.0 percent of total remittances. In their view, the reason of stronger growth of the share of unrecorded remittances to Bangladesh is the relative convenience of hawala or hundi system to their needs. Compared with formal banking channels, the hawala system is not only generally less expensive but can also be a more accessible and convenient option for easy remittance of funds. The other study was conducted by ILO also finds that in Bangladesh almost 46.0 percent of the total volume of remittance has been channelled through the official source, around 40 percent through hundi, 4.6 percent through friends and relatives and about 8.0 percent of the total was hand carried by migrant workers’ themselves when they visited home. Thus considering the above statistics of IMF and ILO it is evident that between 40 and 59 percent of remittances were transferred into Bangladesh through hundis. If this huge amount of remittances were made through the official banking channel, the


178

144 Bangladesh Bank has taken a number of measures to address the bottlenecks in sending remittances through official channels. Banks have been instructed to dispose of remittance related complaints expeditiously. Steps have also been taken to facilitate remittances from USA, UK, Italy and the middle-eastern countries through electronic fund transfer system. Foreign Remittance Monitoring Cells have been opened in different banks for tracking inflows of remittances and addressing obstacles to the smooth flow of remittances. Actions were also taken against banking sector personnel involved in abetting 'Hundi'. Overseas Bangladeshis would be entitled to a special VIP card, gold card and silver card respectively, if they send through the official channel more than $100,000, $50,000 and $20,000 a year. The Government has also undertaken a number of measures to increase the flows of remittances. Various schemes such as Wage Earners' Development Bonds, US Dollar premium bond with 6 percent interest payable in foreign currency, the US Dollar Investment Bond, Non-resident Foreign Currency Deposit account (NFCD) and National Savings Schemes have been introduced to provide incentives to overseas workers in sending remittances. Very recently in 2002, GOB has introduced US Dollar Premium Bond. The principal amount of investment in Wage Earners' Development Bonds can be repatriated without restrictions and the interest earned on the bonds is tax exempt in Bangladesh. Interest earned on NFCD account is also tax exempt and both interest and principal of this account can be freely repatriated abroad. A Non-resident Investor's Taka Account (NITA) has been introduced for facilitation investment in shares and securities by the overseas workers with their foreign exchange earned abroad. The balance in this account can be repatriated abroad in foreign exchange anytime.

foreign reserves position of the country would have been substantially higher. Hence, an immediacy arises of devising policies to improve the efficiency of the official channel by making it less costly and compliance friendly.

In the decision matrix of remitters (i.e. non-resident Bangladeshis, NRBs) the channel they would remit their hard-earned foreign currency should ideally depend on several cost factors, the most important of which are transfer fees, number of days required to remit and the simplicity in accomplishing administrative formalities i.e. paper work. The fact that informal agents can deliver money on short notice with almost no paper work and minimal commission requirement and can reach remote areas of the country very easily makes the unofficial channel attractive to migrant workers and their families. However, bringing the informal remittance-service providers into the formal structure under a proper regulatory environment may be considered a challenging issue for the policey makers. For this, several strategies can be adopted, such as formalizing the informal Hawaladers in the system where they can collect remittances abroad and disburse the equivalent amount of domestic currency instantly to the home country recipients given that they are subject to declare the collected foreign currency within a stipulated period of time as determined by the regulatory authority. While developing and implementing the regulatory framework it should be ensured that the cost of mediating remittances is minimized through the process.

Though over the last few years various steps have been taken to boost the flow of remittances through the official channels, these efforts have proven to be insufficient in reaching the recipients of remote areas with remittance services.144 Presently, micro-finance institutions (MFIs) are not allowed to deal in foreign exchange and remittances, which with their country-wide


179

145 The study showed that, share of NCBs in total inflows of remittances through the banking channel declined from 73.19 percent in FY98 to 55.72 percent in FY05; one the other hand, PCBs share reached 39.78 percent in FY05 from 22.96 percent in FY98. At the same time, the share of foreign banks declined marginally to 3.62 percent from 3.76 percent.

network can reach the door of migrant families. The MFIs, which enjoy the economies of scale and, are characterized by a robust financial base and strong rural networks, can be utilized to channel remittances to the families of migrant workers. Benefits of utilizing the large MFIs for this purpose are that these institutions already have greater accessibility to rural peoples and can provide services in a cost effective way. Initially, two or there major institutions can be allowed to operate in providing remittance services in order to ensure proper monitoring. The selected MFIs may be given dispensation to enlist with foreign banks as correspondent agencies. Their activities must comply with Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) laws in order to ensure legal regulatory requirements.

Bahar et. al. (2006) showed that over time there has been a change in the role of banks in channelling remittances. According to the study, the share of NCBs has declined over the years and that of PCBs have increased significantly, while the role of FCBs have remained almost unchanged.145 It is observed that NCBs tend to offer lower exchange (BDT/USD) rate for inward remittances than their counterparts, namely PCBs and FCBs. At the end of December 2004 the T.T. clean rate (the rate applicable to inward remittances) offered by NCBs was lower by about 0.40 BDT than the PCBs, which widened further by about 0.95 BDT at the end of December 2005, reaching 1.35 BDT per dollar. Hence the maintenance of non-market exchange rates may also hamper their drive to attract additional remittances. It is well known that the NCBs have networks that spread to almost all remote areas. Therefore, many overseas remitters are able to maintain bank accounts more easily in NCBs. It is expected that minimization of exchange rate differential between NCBs and PCBs would create a more competitive market environment. It is plausible that the exchange rate differential between NCBs and PCBs leads potential remitters to seek out unofficial remittance service providers given that PCBs/FCBs have only a handful of bank branches, and also they are poorly connected to the remote areas.

Most of the overseas workers are semi-skilled blue color workers who have limited knowledge on administrative formalities, advantages and incentives in the official transfer of remittances. Growing awareness on the part of remitters of the announced tax incentives, administrative simplicity, national priorities relevant to official means, will animate them to resort to official


180

146 Prepared by Md. Alauddin Majumder, Research Economist.

means of transfer and in this respect remitting banks have a substantial role to play. They can publish brochures and promotional materials, where the relative advantages of using the official channel may be clearly presented. Secondly, regulatory authorities should ensure transparency in the structure of transaction fees, exchange rate and tax treatment.

5.4 Oversight of Payment and Securities Settlement Systems 146

(a) Introduction

Payments and securities settlement systems are vital to the financial stability of an economy. Any sort of disruption in any of the systems may have far reaching domino effects causing financial disruption. Such disruptions are not hard to find if the settlement systems remain subject to no supervisory or overseeing activities conducted by a competent authority. As system participants do not take into account the potential externalities generated by the system while making their own cost-benefit calculations, market failure in the system operation remains a possibility with the result that the financial system is far from being efficient. This is why a competent authority must oversee the systems operated for settlement and payments for transactions in securities. Over time the oversight issue has drawn ample attention all over the world. Countries are increasingly performing oversight functions with a view to eliminating or at least reducing the systemic risk involved in payment and securities settlement system. Bangladesh is no exception.

(b) Overseeing Authorities

Bangladesh Bank has assumed the responsibility for conducting the oversight of payment systems of the country through its Department of Currency Management and Payment Systems. This responsibility originates from Articles 7(e) and 26 of the Bangladesh Bank Order 1972. According to Article 7(e), one of the main functions of the Bank is to promote, regulate and ensure a secure and efficient payment system, including the issuance of bank notes, while Article 26 relates to the conduct of the issue of bank notes. On the other hand, securities settlement system relating to stock exchanges is solely overseen by the SEC. It should, however, be noted that settlement of government securities and bonds is within the purview of the Bangladesh Bank.

(c) Cash Payment System

As part of the oversight of cash payment system, Bangladesh Bank continuously makes effort to maintain currency in circulation at a suitable


181

level in line with the public’s need for cash payments. It circulates fresh currency almost every year. The amount of fresh money to be circulated is determined by the extent of increased mediation of economic activities and the amount of unfit notes that are replaced. A serious threat to cash payment system emerges from the counterfeiting of notes and coins. Bangladesh Bank takes various timely actions to prevent such threats. Examples of these actions include growing public consciousness by passing information to the public regarding security features of genuine notes, upgrading of security features from time to time, meeting on a regular basis with the representatives of concerned ministries, departments and banks. Under its clean note policy, Bangladesh Bank has a regular process of withdrawal, destruction and replacement of unfit (torn/soiled) notes for users’ convenience.

(d) Non-cash Payment

Non-cash payment system is also prominent in the Bangladesh economy. This method has gained large popularity because of the fact that in one hand people feel personally more secure when they bear non-cash instruments (cheques, drafts, pay-orders, bills etc.) than when they carry cash, and on the other hand transactional complexities reduce substantially. To oversee the non-cash payment system Bangladesh Bank has already established 39 clearing houses in economically important locations throughout the country. Eight of them are managed by the Bangladesh Bank itself in its offices in major cities and the rest by Sonali Bank (an NCB) in other locations. According to the Annual Report-2005 of Bangladesh Bank, about BDT 2,923,942 million worth of payments were cleared and settled through all clearing houses in FY05 while the figure was BDT 2,673,546 million during FY04, representing a nominal year over year growth of 9.37 percent. For making payment settlement more effective, safe and secure, the Bangladesh Bank has taken steps to modernize the clearing houses. For example, it has introduced same day clearing system for instruments of 5 lac & above received from Dhaka city and adjacent area. Currently Bangladesh Bank is collecting data related to instruments of clearing house in diskettes from participating banks and a LAN server is being used. In the modernization process, which has been envisaged to conform to the international payment standards, Bangladesh Bank has constituted Inter-bank Consultative Group consisting of members from NCBs, PCBs and FCBs. Introduction of Magnetic Ink Character Recognition (MICR) technology is in progress. Recently Bangladesh Bank has been incorporated as a member of ‘National Automated Clearing House Association' (NACHA). NACHA is one of the pioneer organizations in developing the electronic payment system. As a result of ongoing oversight activities, the non-cash payment settlement system will hopefully be fully automated and thus eventually be more quick, safe and secure.


182

147 This section is based on Kazemi (1998).

(e) Foreign Currency Settlement

With a view to eliminating sluggishness and cumbrousness in foreign currency settlement system several steps were taken by the central bank.147 Major among these are as follows:

l Unification of previously diversified exchange markets in January 1992 with free access for all permissible purposes at rate based on the market clearing exchange rate.

l Introducing full convertibility of BDT, the Bangladesh currency, in current account as per IMF article VIII definition by April 1994.

l Substitution of absolute foreign currency holding limits for banks by capital based open exchange position limits.

l Arrangement of a foreign currency clearing accounts in the central bank.

l Adoption of market based floating exchange rate system in May 2003.

(f) Securities Trading Settlement

In Bangladesh, transactions of securities are settled in two clearing houses, one is arranged by Dhaka Stock Exchange (DSE) and another by Chittagong Stock Exchange (CSE). The clearing houses are operated on the basis of evolving regulations as enacted from time to time by DSE and CSE. The SEC, deriving its power mainly from Securities and Exchange Ordinance-1969, Securities and Exchange Commission Act-1993 and Depositories Act-1999, oversees the securities settlement system. For performing oversight functions – monitoring, assessing and inducing change – SEC analyzes the information on settlement contained in the weekly report on clearance and settlement of transactions furnished by DSE and CSE. SEC has been empowered to punish the guilty in the event of any failure. If the failure seems to occur due to deficiencies in the system it may direct DSE and CSE to make necessary changes in rules and regulations. In order to render oversight activities more efficient SEC allowed Central Depository Bangladesh Ltd. (CDBL) to operate and maintain central depository system under its Depositories Act, 1999. Establishment of CDBL, which may be considered as a milestone in the history of Bangladesh’ capital market, itself is an oversight action. The operation of CDBL ensures faster and best possible settlement services by eliminating risks and hassles involved in the physical transaction of securities.


183

148 Prepared by Md. Kabir Ahmed, Research Economist.149 The main elements of macro-prudential surveillance are capital adequacy, asset quality, management efficiency, earning and liquidity. Since these elements are discussed in detailed in Chapter 3, this approach has not been followed here.

(g) Future Challenges

Major overseeing challenges lie ahead both for BB and SEC. These authorities will have to be equipped with tools necessary for the settlement of the emerging electronic transactions (both cash and non-cash means in commodities and financial assets including securities trading in stock exchanges). Greater use of ATMs and the range of activities effected via ATMs (e.g., payment of utility bills such as electricity, water, cable, phone and internet invoices for subscribers) are likely areas of future expansion. Developing faster means of settlement of these transactions is of immediate need. Other important areas are the future of debit and credit card transactions. In all these areas, the development and safeguard of secure settlement modalities and the control of potential frauds in such activities.

5.5 Factors Affecting Financial Sector Risk and Stability 148

(a) Introduction

Safeguarding financial stability is indeed an important part of maintaining macroeconomic and monetary stability, and also for achieving sustainable growth (Fell and Schinasi, 2005). Schinasi (2004) argues that a financial system is stable if it has the following three characteristics: (a) it is efficiently and smoothly facilitating the inter-temporal allocation of resources from savers to investors and the allocation of economic resources generally (b) forward-looking financial risks are being assessed and priced reasonably accurately and they are also being relatively well managed and (c) the financial system is in such condition that it can comfortably if not smoothly absorb financial and real economic surprises and shocks. If any one or a combination of these characteristics is not being maintained, then it is likely that the financial system is moving in the direction of becoming less stable, and at some point might exhibit instability. Though a plethora of literature has been developed in the recent years, there is no consensus either between academics and practitioners, or indeed within either camp, on how the financial stability objective might best be pursued (Goodhart, 2005). However, IMF (2005) has developed an analytical framework to monitor financial stability. After reviewing this framework, the following approaches are adopted to analyze the banking sector stability of Bangladesh.149


184

150 For details, see section 5.1 to 5.4

(b) Quantitative Indicator Approach

(i) Macroeconomic Approach

It is based on the idea that macroeconomic policies cause crisis, and it tries to predict banking crises using macroeconomic variables. Bank’s asset quality is affected by the state of the business cycle, the corporate financial structure, and the level of real interest rates, which together influence the capacity for debt servicing. In a study, IMF (2003) has found that a 1-percentage point rise in GDP growth resulted in a 2.6 percentage point decline in the NPLs-to-loans ratio, reflecting the fact that fewer corporations are likely to experience problems repaying loans during rapid growth. Higher interest may increase the possibility of declining profitability for some borrowers, which, in turn, encounter difficulties in repaying bank loans. Demirguc-Kunt and Detragiache (1998) study the factors of systemic banking crises in a large sample of countries using a multivariate logit model and find that crises tend to erupt when growth is low and inflation is high. They also find that banking sector problems are associated with high real interest rates, the vulnerability to balance of payment crises, the existence of an explicit deposit insurance scheme, and weak law enforcement in the financial system.

The schematic view of the above arguments is as follows:

(i) GDP 5= NPL 6= Financial stability

(ii) Lending rate5, inflation5 = NPL 5 = Financial stability6

(iii) High real interest rate, 5BOP Crises6= Financial stability6(iv) Weak law enforcement => Possibility of Financial Instability150

Indeed, the Bangladesh economy has been growing moderately (more than 5 percent) since 2003 and is expected to grow above 6 percent in the current fiscal year. On the other hand, both real deposit rate and real lending rate consistently went down since 2001 and the interest margin between them also correspondingly declined except for the widening of the margin in December-February 2005-06. It indicates that banking sector is gradually becoming more competitive. Inflation rate in 2001 was 1.94 percent which increased to 6.62 (considering 12-month moving average CPI) percent in 2005. If this rising inflation trend persists, it may be a cause for concern of financial sector instability.


185

(ii) Ownership Approach

It is argued that the ownership pattern of domestically controlled banks needs to be considered for the stability analysis. Since public banks have state guarantee, they are less likely to destabilize the system except that they may well destabilize the financial markets by inflicting large public sector borrowing requirements. Domestic private banks are, on the other hand, considered more prone to bank runs. The activities of foreign bank branches may also be a source of risk to the banking system. It is therefore argued that for the domestic branches of foreign banks, parent banks need to extend their support during a crisis and central bank may require this kind of support as a pre-condition issuing banking licenses.

At present, 9 government-owned banks, 30 private banks and 9 foreign banks are operating in the banking system of Bangladesh. Though the government-owned banks dominated the banking system since inception, their share in total deposit dropped below 50 percent since 2004. It indicates that government’s fiscal involvement in the financial system risk is declining and depositors are now more exposed to systemic risk. Similarly, government-owned banks’ share in total assets also went below 50 percent since 2004 (see chapter 3). It can be noted that while non-performing loans in NCBs in 2005 was 21.35 percent, private banks had only 5.62 percent classified loans. Though deposits of private banks do not have the implicit guarantee by the government, depositors' risk is, to a greater extent, minimized by very low level of credit risk which, in turn, contributed to reduce overall instability in the financial system.

-2-10123456789

10111213

99 00 01 02 03 04 05

Dr LrGap

GDPr

Inflation (n)

Figure 5.5.1Movement of GDP, interest rate and inflation

Source: Figure is based on data from Economic Trends and BBS


186

(iii) Financial Market Indicator Approach

This approach assumes that equity and debt prices contain information on bank conditions beyond that of balance-sheet data. Market-based Early Warning System (EWS) models are based on the premise that financial asset prices contain information on market beliefs about the future. The advantage of equity and debt data is that they can be available in high frequency and that they should provide a forward-looking assessment (Bongini, Laeven and Majnoni 2002; Gropp, Vesala, and Vulpes 2002). Except Oriental and Rupali Banks, share price of all the listed banking companies were above the face value in the last five years. Indeed market price per share was 2.21 times of face value in 2001 which increased to 5.09 times of face value in 2004 and then went down to 4.27 times of face value in February 2006.151 In view of these developments, it can be argued that market-based net worth of listed banks are significantly higher than book capital and public's expectation about the prospect of the industry is steady growth.

(iv) Degree of Concentration of the Banking System of Bangladesh

Concentration of banking asset indicates that banking system is exposed to high risk and may be vulnerable to any shock to the system. By applying Hirschman and Herfindhal Index (HHI) and C4-Index, concentration of

0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 Feb. 06Av.

face

val

ue; A

v. m

arke

t val

ue

Av. face value Av. market value

Figure 5.5.2Equity Prices of Listed Banking Companies

Source: Monthly Review (various issues), Dhaka Stock Exchange

151 Though the share price of Rupali Bank on 31st December, 2001 was BDT 96, it significantly increased in the next couple of years and reached to 5 (five) times of face value by February 2006. On the other hand, share price of the Oriental Bank went down below face value in 29 December, 2005 and further deteriorated by the end of February 2006.


187

asset in the banking system of Bangladesh has been estimated. It is found that both HHI-private and C4-Private indices declined over the period 1999 to 2005. In other words, concentration of banking asset among the private banks has decreased over the period. HHI for foreign banks increased in 2002 and then marginally declined in 2005. But C4-Foreign index shows that concentration of assets among the foreign banks has increased over the years. Combined effects of both private and foreign banks, in terms of HHI, show that HHI for non-governments have decreased over the last 6(six) years. Likewise, C4 index for non-government banks remained steady in 2002 and declined in 2005.

(b) Qualitative Approach

It is argued that a range of qualitative information is also needed to assess the banking system, including the strength of the regulatory framework, the functioning of the payment system, accounting and auditing standards, the legal infrastructure, and the financial sector safety nets. The strength of the regulatory framework indeed needs to be assessed on the basis of the Basel Core Principles. As sections 5(b) and 5(e) have highlighted on accounting and auditing standard and payment system, they are not further discussed here.

(i) The strength of the regulatory framework

BB is largely compliant of Basel Core Principles (BCPs) for effective banking supervision. Most of the 25 core principles have already been implemented in the financial sector Bangladesh. Implementations of some of the important Principles are discussed below:

Principle 1 argues for clear responsibilities and objectives, autonomy, enforcement, powers and resources for each agency involved in the supervision of banks. In the light of the above principle, the Bangladesh Bank Order 1972, the Bank Company Act 1991 and the Bank (Nationalization) Order 1972 were amended in 2003 with a view to further strengthening the activities of the banking system, bringing dynamism and extending greater administrative and operational autonomy of the Central

Table 5.5.1Concentration of Assets in the Banking System of Bangladesh

Year HHI. Foreign HHI. Private HHI. non-govt C4-Private C4-foreignC4-non-govt.

1999 0.25757798 0.076587 0.059045 0.457052 0.818760 0.384030

2002 0.41822767 0.060023 0.055501 0.403601 0.863891 0.389881

2005 0.34991191 0.048681 0.044208 0.300329 0.888116 0.307599


188

Bank. The preamble of the BB Order 1972 has been modified to describe more meaningfully the purpose of establishing the Central Bank, clearly defined its main functions, objectives and provides more authority to BB Board.

Principle 8 states that banking supervisors must be satisfied that banks establish and adhere to adequate policies, practices and procedures for evaluating the quality of assets and the adequacy of loan loss provisioning and reserves. From time to time, BB has laid down detailed guidelines on income recognition, asset classification and provisioning requirement in line with international best practices.

Principle 9 states that supervisors must set prudential limits to restrict bank exposures to single borrowers or group of related borrowers. BB (vide BRPD Circular no. 08/2003) prescribed prudential exposure norms for lending to individual/group up to 50 percent of bank’s total capital wherein funded loan had been restricted to 25 percent. These criteria have been further strengthened in 2005 (vide BRPD Circular No.) by reducing the single borrower exposure limit (funded and non-funded) from 50% to 35% and the maximum funded facilities up to 15% of the total capital.

Principle 15 is related to “Know-your-customer (KYC)” rules to promote high ethical and professional standard in the financial sector. As mentioned earlier that a guideline on Prevention of Money Laundering outlining the detailed procedure of KYC has been issued. Besides this, Money Laundering Prevention Act has already been enacted to prevent illegal and suspicious transactions.

Principles 16 to 20 are related to banking supervisory system and procedure. As per Basel requirement, BB initiated both on-site and off-site supervision. Periodical on-site inspection is supported by off-site monitoring where periodicity depends on bank’s specific conditions.

Principle 21 is related to bank’s maintenance of adequate record in accordance with consistent accounting policies and practices and publication of financial statements that fairly reflect its condition. BB requires the bank companies to prepare and disclose information in their financial statements as per the International Accounting Standard. External auditors, appointed with the approval of BB, are required to report specifically whether the financial statements exhibit a true and fair view of the affairs of banks.

Steps that Need to be Taken to be Fully Compliance of Basel Core Principles

Principle 6 states that banking supervisors must set minimum capital requirements for banks to reflect the risks that the banks undertake, and must define the components of capital. For internationally active banks,


189

these requirements must not be less than those established in the Basle Capital Accord. Bangladesh has already implemented Basel Capital Accord I. Indeed, Basel I considered credit risk only. Subsequently, Basel Committee has identified some other risks such as operational risk and market risk and suggests charging capital against them in Basel Accord II. However, banks in Bangladesh are yet to require charging capital against such risks. In order to implement Basel II, a national steering committee has been formed comprising representatives from commercial banks. The committee will decide on the time frame to be implemented, approaches to be adopted and the road map for transition to Basel II. Tentatively, it has been decided that domestic banks may start implementing Basel II from early 2009.

Principle 12 states that banking supervisors must be satisfied that banks have in place systems that accurately measure, monitor and adequately control market risks; supervisors should have powers to impose specific limits and/or a specific capital charge on market risk, if warranted. The market risk is indeed defined as the risk of losses in on-balance sheet and off-balance sheet positions arising from movement in market prices. The market risk positions subject to capital charge requirement include: (i) risk pertaining to interest rate related instruments and equities in the trading book; and (ii) foreign exchange risk throughout the book (both banking and trading books). In India, as an initial step towards prescribing capital charge for market risks, banks have been advised to: (i) assign an additional risk weight of 2.5 percent on the entire investment portfolio; (ii) assign a risk weight of 100 percent on the open position limits on foreign exchange and gold; and (iii) build up Investment Fluctuation Reserve up to a minimum of five percent of the investments held in Held for Trading and Available for Sale categories in the investment portfolio. RBI decided that banks should maintain capital charge for market risk in a phased manner over a two-year period : (a) Capital for market risks on securities included in the trading book by March 31, 2005 and (b) capital for market risk on securities included in the Available for Sale category by March 31, 2006. BB may outline a guideline to quantify market risk and thereby charge capital against it.

Principle 13 states that banking supervisors must be satisfied that banks have in place a comprehensive risk management process to identify, measure, monitor and control all other material risks and, where appropriate, to hold capital against these risks. In order to give a sound footing to risk management practices, BB issued 5 (five) guidelines on five ‘core’ risk areas of banking which are (i) credit risk (ii) asset and liability/ balance sheet risk (iii) foreign exchange risk (iv) internal control and compliance risk and (v) money laundering risk. Though capital charge against credit risk has been formalized, BB is yet to require the banks to hold capital against the other risks.


190

(ii) The financial sector safety net approach

The adequacy of the safety net and the adequacy of regulatory capital together provide a minimum level of resilience for national financial systems (RBI, 1999). Bangladesh is continuously making efforts to increase financial safety net and capital adequacy base by strengthening and updating its legal framework. Deposit Insurance Scheme as financial sector safety net was, in fact, introduced in Bangladesh in 1984 through the Bank Deposit Insurance Ordinance 1984. According to this ordinance, every scheduled bank shall pay to the Bangladesh Bank a premium on deposits at the rate of four paisa per hundred taka. Where an order for the winding up of an insured bank is made, the Bangladesh Bank shall pay to every depositor of that bank an amount equal to the amount of his deposit in that bank but not exceeding sixty thousand BDT. The above ordinance has been repealed and a new act, namely Bank Deposit Insurance Act 2000 was introduced in 2000. According to this Act, Bangladesh Bank will maintain a fund namely Deposit Insurance Trust Fund. All the scheduled banks will be insured against this fund. Every insured bank will pay 0.07 percent annually as premium against its deposits. Bangladesh Bank will have to pay every depositor equal amount of his deposit which cannot exceed maximum BDT 1.00 lac. In December 2004, the balance of the Fund was 3.5 billion BDT which increased to 4.25 billion BDT in 2005 i.e. 21.43 percent increased from the earlier year. On other hand, risk-based capital standard had been introduced in 1996 and minimum requirement for bank’s capital was significantly increased in 1996, 2002 and 2003 (for details see section 3.8). Except government-owned banks, risk-weighted capital adequacy ratio was 11.1 percent in 2005 i.e., 2.1 percent above the regulatory requirement.

Conclusion

Major macroeconomic indicators support further strengthening of financial sector stability. However, rising inflation trend seems to be a major concern for financial sector stability in near future. Ownership approach suggests that government’s fiscal involvement in the financial system risk is falling due to steadily declining its share (which went below 50 percent since 2004) in the banking system’s total deposit. Conversely, risk of private banks’ depositors is, to a greater extent, minimized by very low level of credit risk (only 5.62 percent classified loans in 2005) which, in turn, contributed to reduce the overall instability in the financial system. Both HHI-private and C4-Private indices indicate that concentration of banking asset declined over the period 1999 to 2005. But C4-Foreign index shows that concentration of assets among the foreign banks has increased in the last couple of years. Market-based higher net worth of listed banks shows that public's expectation about the prospect of the industry is steadily


191

152 Prepared by Dr. Md. Habibur Rahman, Senior Research Economist drawing partly on OECD Economic Outlook, June 1997.

growing. The performance of Deposit Insurance Fund (which increased to 4.25 billion BDT in 2005 i.e. 21.43 percent increased from the earlier year) as a financial sector safety net is noteworthy. Bangladesh is a major compliant of Basel Core Principles. Nevertheless, implementation of Basel Core Principles 6, 12 and 13 may require the banks to increase capital substantially than their current position. Considering the above arguments, overall status of financial sector seems to be stable. Nevertheless further policy direction in curving inflation, divergence of asset in foreign banks and a gradual and orderly adjustment of higher capital requirement would appear desirable for the further stability of the banking sector.

5.6 Financial Market Outlook 152

Development in the financial sector raises the overall efficiency of the financial institutions. A well-developed financial system has been widely understood as a stimulant in accelerating economic growth by mobilizing savings and facilitating investment in an efficient manner. An efficient and competitive financial sector is one of the keys to economic growth as it facilitates savings and investment. A stronger financial sector is critical to improving income levels. Low-income families, small-to-medium size enterprises, and rural entrepreneurs in a developing country like Bangladesh have difficulty obtaining financial services. By facilitating transactions and making credit and other financial products available, the financial sector is a crucial building block for private sector development which is now widely believed to be the ultimate engine of growth. It can also play an important role in reducing risk and vulnerability, and increasing the ability of individuals and households to access basic services like health and education, thus having a more direct impact on poverty reduction.

The financial sector of Bangladesh economy have been under rigorous reform program since early 1990s, in order to reap the recognized benefits of efficient financial markets - improved allocation of savings through pooling and market-based pricing of credit and other types of risks and, in an international context, access to world financial markets with substantial economies of scope and scale. This reform program has included more flexibly managed or fully market-determined interest rates for both creditors and debtors; reduced reliance on public credit programs and interest rate subsidies; and promotion of competition among financial institutions by authorizing the entry of new institutions, reducing or breaking down barriers between bank and non-bank financial intermediation and allowing the development of new types of financial services with market-based fees and commissions.


192

External liberalization has been an important component of these programs, with controls on international payments being relaxed and financial sectors being gradually opened to foreign participation in many cases. These two types of financial reform are complementary, in the sense that liberalized domestic financial institutions and, through them, the ultimate borrowers and investors are in a better position to profit from access to global capital, as well as from the transfer of knowledge and technology of financial intermediation from abroad. In addition, foreign competition can help to increase the efficiency of domestic financial markets. Finally, these financial reforms have typically been part of a much broader package of economic stabilization and pro-market structural reforms (OECD Economic Outlook, June 1997).

As an integral part of the Financial Sector Reforms Program (FSRP), recently a series of major policy actions has been taken under the reform program in line with the goals and objectives of medium term macroeconomic policy matrix. The FSRP, which was launched in 1990, has become a continuous process in bringing proper discipline as well as efficiency in the financial sector. The broad objectives of the FSRP are as follows:

l Liberalization of the interest rate structure;

l Liberalization of the external sector;

l Deregulation of foreign exchange market;

l Strengthening of banking inspection and supervision;

l Maintenance of capital adequacy requirement;

l New system of loan classification;

l Restructuring of legal framework in the financial sector;

l Development of capital market;

l Development of the banking system, and asset quality;

l Computerization of central bank as well as commercial banks; and

l Domestic and foreign training for the development of bank officials.

Besides, the monetary authority of Bangladesh has pursued a series of Legal, Policy and Institutional reforms to improve the process of financial intermediation and ensure efficient allocation of financial resources and in the ultimate analysis improve the competitiveness of the private sector and thereby promote investment and growth in the real sector. The thrust of the reform program is to improve the environment for, and the ability of bank owners, bank management, bank regulators and the markets to provide for


193

better governance and regulation to achieve the above- mentioned objectives. The reform program focuses on: (i) greater autonomy to the Bangladesh Bank (BB); (ii) strengthening of the BB's capabilities and technical skills to perform its enhanced responsibilities; (iii) strengthening prudential regulations and supervision; (iv) restructuring the management and internal processes of NCBs and ultimately privatization of selected NCBs and SBs, (v) strengthening the legal and judicial processes and (vi) improving the money and debt markets. The Financial Institutions Development Project (FIDP), formally launched in February 2000 which is administered by Bangladesh Bank, has made substantial improvement towards sustainable financing of private sector initiatives in accelerating industrial growth in Bangladesh.

Given the pace, dept and coverage of the financial sector in Bangladesh it is quite reasonable to expect that the financial market in Bangladesh would gain enough competitiveness, efficiency, dynamism and stability that is supportive to the smooth transformation of Bangladesh from a low income to a middle income country. Nevertheless, there are well known risks and difficulties associated with the implementation of reforms and the transition to an open, market-based financial system. These risk and difficulties often associated with the developing country like Bangladesh that have typically embarked on from an initial position of less liberalized financial regime, more fragile financial system, less financial expertise and poorly developed system of prudential regulation and supervision as compared with the developed and industrialized countries. The developing country like Bangladesh has also tended to experience much greater macroeconomic volatility. To some extent, this reflects lack of economic diversification - economic dependence on a handful of primary commodities, for example. The key examples of poor and unsustainable macroeconomic policies are high and very volatile inflation, occasionally degenerating into hyperinflation, and large fiscal deficits. These two have often been linked, as fiscal deficits have at times been financed by money creation, resulting in inflation.

References

Bahar, H., Md. A.A. Sarkar and Md. Belal (2006), "A Study Report on Remittance in Bangladesh," Research Department, Bangladesh Bank (unpublished).

Bangladesh Bank : Bangladesh Bank Annual Report 2005.

Bangladesh Bank : Bangladesh Bank Order 1972.


194

Fell, J. and Schinasi, G. (2005), Assessing financial stability: exploring the boundaries of analysis, National Institute Economic Review, No. 192, PP. 102-117.

Financial Stability Review (2005), Bank of England, Issue No. 19, PP. 1-118.

Goodhart, C.A.E. (2005), Financial Regulation, Credit Risk and Financial Stability, National Institute Economic Review, No. 192, PP. 118-127.

Kazemi, M.A.M. (May 1998), “Financial Sector Reform: the Bangladesh Experience,”Country paper for ESCAP seminar on Improved Management of the Financial Sector.

Large, S.A. (2005), Financial Stability: managing liquidity risk in a global standard. In Financial Stability Review (2005), Bank of England, Issue No. 19, PP. 1-118.

OECD Economic Outlook, June, 1997.

Reserve Bank of India (1999), Emerging Trends in Supervision, Mouj Printing Bureau, Mumbai, PP. I-vi + 1-194.

Schinasi, G. (2004), ‘Defining financial stability’, IMF Working Paper 04/187, Washington, DC.

Website of Securities and Exchange Commission.

Chapter 5siteresources.worldbank.org/PSGLP/Resources/chap5.pdf · 138 Bangladesh Bank Annual...

Documents

Transcript of Chapter 5siteresources.worldbank.org/PSGLP/Resources/chap5.pdf · 138 Bangladesh Bank Annual...