CCBL: Born to die? How a clearing house became a costly burden on the capital market

Infographic: TBS

The Central Counterparty Bangladesh PLC (CCBL) was envisioned as the crown jewel of the capital market – a sophisticated, independent entity designed to modernise the clearing and settlement system, ensuring transparency and enabling the high-volume trading characteristic of advanced global bourses.

Incorporated in 2019 with significant fanfare, it was meant to segregate the settlement process from the stock exchanges, thereby reducing systemic risk.

Now, nearly seven years after its inception, the institution has transformed from a beacon of reform into a stagnant "white elephant," described by market participants as a costly burden that has failed to execute even its most basic functions.

Despite a substantial paid-up capital of Tk300 crore, the company has yet to begin operations. It remains trapped in perpetual inertia, lacking both the necessary software to run a clearing system and the mandatory registration from the Bangladesh Securities and Exchange Commission (BSEC) to conduct core business.

This failure has directly affected the Dhaka Stock Exchange (DSE), which continues to struggle under an aging settlement framework, preventing the market from achieving the speed, transparency, and transaction volume required for a modern economy.

Capital in limbo

Financial data reveals that CCBL has essentially operated as a fund management firm rather than a clearing house. Its office expenses are met through interest income from fixed deposit receipts (FDRs). The company maintains roughly Tk281 crore in FDRs across 14 banks. Alarmingly, Tk20 crore of this capital is held in the non-viable Exim Bank, alongside an additional Tk20 crore investment in Exim Bank bonds.

This exposure to a struggling financial institution has raised serious questions about the fiduciary responsibility of CCBL's management and board, according to market insiders.

Governance in Question

The governance structure of CCBL has become a subject of ridicule among market stakeholders. The company currently has a top-heavy board of 10 members, yet actual management is handled by a skeleton crew of only four officers.

Mominul Islam, chairman of the DSE, told The Business Standard that CCBL was established with what he calls "non-practical ambition." He said that since its 2019 incorporation, the company has remained non-functional, prompting DSE shareholders to fundamentally question its continued existence. As a primary investor, the DSE is no longer willing to wait for a miracle.

DSE voices frustration

To address these grievances, DSE leadership recently met with Anisuzzaman Chowdhury, special assistant to the chief adviser and chairman of the committee formed to strengthen the capital market. High-level government officials and BSEC representatives were present, where the DSE formally raised concerns regarding CCBL's inactivity.

According to Mominul, the government has requested precise recommendations on the entity's future. In response, the DSE is seeking legal counsel to determine whether the current CCBL structure is salvageable or has become a redundant obstacle.

Mominul further criticised the flawed process through which CCBL was created, comparing it unfavourably to international models. 

He said in Sri Lanka, a clearing and settlement company was formed under the stock exchange's umbrella for an initial three-year period to ensure functionality before gaining independence. In Bangladesh, however, CCBL was pushed into independence without a functional foundation, resulting in unnecessary costs and a complete lack of progress.

Flawed design

The sentiment is echoed by Minhaz Mannan Emon, a shareholder director of the DSE, who argues that CCBL was designed incorrectly from the start. He said the board was populated by independent directors who lacked the technical expertise to run a highly specialised clearing and settlement business. This deficiency, he contends, is the primary reason CCBL could not secure regulatory registration in seven years.

Emon highlighted that the DSE invested Tk135 crore in the entity – money effectively belonging to brokerage houses. "Had this capital remained as an FDR under the DSE's control, it would have generated over Tk100 crore in interest over the last seven years. Instead, the DSE has watched its investment erode in a non-functional venture."

Stakeholders demand action

Frustration is compounded by CCBL management's failure to submit a viable action plan when requested by the BSEC last year. Market leaders like Emon now believe the DSE is more capable of running the clearing and settlement business independently. Calls for winding up CCBL are growing louder, as stakeholders refuse to continue "dumping money" into an institution lacking a roadmap.

Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), said the 250 members of the DSE demanded full ownership of CCBL during the last annual general meeting. 

In a formal letter, the brokers argued for a drastic reduction in CCBL's paid-up capital, calling the current Tk300 crore an excessive waste. 

The DBA also called for immediate separation of management from the board and the recruitment of qualified professionals to replace the "ridiculous" setup of ten directors overseeing four employees.

Suspicious procurement

Adding to the controversy are allegations of suspicious procurement decisions. Sources indicate that a previous board planned to purchase clearing software from Tata Consultancy Services Limited (TCS) for a staggering $12 million. 

The DSE raised concerns that the price was significantly above the market rate and posed potential security vulnerabilities to the country's critical technology infrastructure. The BSEC intervened to halt the procurement, yet the incident left lingering doubts about the entity's past decisions.

Ownership concerns

The ownership structure is also under scrutiny. While the DSE, Chittagong Stock Exchange (CSE), and Central Depository Bangladesh Limited (CDBL) hold the majority of shares, a significant portion is distributed among various banks, including National Bank, NCC Bank, and others. 

Among these, Social Islami Bank and Global Islami Bank became non-viable due to massive irregularities and have since merged into Sammilito Bank. Market participants question why these banks, many with their own governance issues, were given stakes in a critical market utility like CCBL.

CCBL officials declined to comment to The Business Standard.