Default status of bonds needed to report in CIB (Credit Information Bureau) of Bangladesh Bank to develop the bond market.
The suggestion came at an interactive discussion titled "Macro Economic discussion on Global Markets, South Asia and Bangladesh- Way Forward for Banks,' arranged by City Bank Capital held on Wednesday at the city hotel.
Ershad Hossain, Managing Director & CEO of City Bank Capital, made a presentation and discussed on how Bangladesh and other developing economies are affected by rising inflationary pressures. Mr. Hossain also explained the link between developed markets and Bangladesh and recommended strategies for financial Institutions to invest or issue bonds for interest rate hedge and liquidity.
In his presentation, he said currently default status of bonds are not reported in CIB. As the government wants to develop the bond market and many private organizations are issuing bond, default status should be reported in CIB, otherwise the market will be damaged, he said.
He also emphasized on bringing bond defaulters under money loan court to ensure transparency in the bond market.
He said still banks are leading investors in bond market which creating risk for banking industry as one bank is investing in another bank's bond. Bond investors should be diversified like pension fund and insurance fund should bring in bond.
He said tax incentive for new instruments like Sukuk is needed to encourage investors to invest in.
He said, credit rating agencies paly very significant role in developing bond market as investors will take decision on bond rating.
Currently, there are eight credit rating agencies and the number is quite high. The number of credit rating agency should not be high and the rating agencies should have credibility to establish strong bond market, he added.
In his presentation, Ershad said that in India capital market exposure is calculated based on the type of the bond. For example, convertible bonds and convertible debentures are included in capital market exposure.
However, Bangladesh Bank calculates capital market exposure based on listing of the bonds rather than the volatility or riskiness of the bond issuer.
Listing of the bond ensures liquidity for the investors, so it should not be a measure for including or excluding in capital market exposure, he opined.
High officials of several distinguished corporates and banks, including The World Bank were present in the discussion session and shared their prudent insights.
Raising lending rate cap issue participants said that yield of long term bond went up to 8% to 9% when interest rate on loan is 9%. In this situation, banks will prefer to invest in bond instead of risky loan book which will hamper private sector credit growth.
City Bank capital is trendsetter in the bond market as it was lead arranged of first ever corporate green sukuk bond called Beximco Green Sukuk, first ever perpetual bond named City Banki perpetual bond and first bank guaranty backed zero coupon bond.
City Bank capital is now working on 10 projects for bond issuance worth Tk3,400 crore, according to the company profile.