BSEC steps in to strengthen bond market
The stock market regulator has stepped forward in strengthening the bond market so that it can be a long-term source of finance.
The Bangladesh Securities and Exchange Commission (BSEC) in a gathering yesterday passed an order making getting listed a prerequisite for entrepreneurs issuing perpetual bonds.
A perpetual bond is a fixed income security without maturity date, that these are not redeemable.
IDLC Investments Managing Director Md Moniruzzaman welcomed the BSEC's decision, saying that nowadays investors of the perpetual bonds would be able to avail an exit path.
Every instrument must have an exit route but perpetual bonds had no such route, he said, adding that listing in the secondary industry would help popularise perpetual bonds for issuers. Investors today will be considering purchasing the perpetual bonds, he explained.
It would be positive for the currency markets too because those involved are certain to get another instrument apart from equity, he added.
If any issuer wants to raise funds by issuing perpetual bonds, they have to increase at least 10 per cent through consumer offering, the BSEC said in a news release yesterday.
Already 11 banks 've got the nod to improve funds through issuing perpetual bonds. The lenders will take measures to enlist the relationship on the market through direct listing.
Eleven banks are collecting Tk 4,900 crore altogether through the perpetual bond, based on the BSEC data.
The report on perpetual bonds will be best for the market since it will enhance liquidity, said Ershad Hossain, CEO of City Lender Capital.
If bond issuers succeed, it'll create scope for safe investment also, he explained.
To ensure demand-part pressure, the BSEC set some circumstances for institutional investors seeking to buy the debt securities.
Industry intermediaries such as merchant banks and portfolio managers, asset management corporations and stock sellers will have to invest at least 3 % of their investment in the listed debt securities within June 30 of 2022, said the BSEC.
Each mutual fund will need to invest at least 3 per cent of their funds into listed debt securities and it will be ensured by the particular trustee of the funds.
This 3 % is comparatively low because bond sizes are not that very big so the percentage ought to be bigger, said Hossain.
Trustees have to play a vital role to make sure sustainability of the relationship market and so their eligibility, qualification and remuneration ought to be sufficient, he said.
If trustees fail to ensure close monitoring, it has a direct effect on the bond market so the regulator should do something in this respect, he added.
In the interacting with, the BSEC decided to certify Shanta Equity as a full-fledged merchant bank.
BSEC Spokesperson Rezaul Karim said perpetual bonds will be listed in the key board.
