Govt forms high-level panel to reinforce BSEC, drive stock market growth

Infographic: TBS

The government has established a high-level four-member committee to strengthen the Bangladesh Securities and Exchange Commission (BSEC) and foster the development of the country's capital market.

According to a notification issued by the Financial Institutions Division (FID) today (18 March), the committee – led by Anisuzzaman Chowdhury, special assistant to the chief adviser – was formed in response to the BSEC's appeal to investigate the chaos on 5 March, when BSEC officials confined the chairman and commissioners to press for several demands.

Its members include Professor M Sadiqul Islam of Dhaka University's Department of Finance and the additional secretary of the FID, with BSEC Commissioner Farzana Lalarukh serving as the member secretary.

The committee has been tasked with providing strategic advice to enhance the operational effectiveness of the BSEC. It will also focus on formulating comprehensive development strategies to strengthen the capital market, with a particular emphasis on increasing the appeal of expatriate bonds.

The other responsibilities are providing policy recommendations to improve the regulation and supervision of the capital market, offering guidance to attract domestic and foreign investments while ensuring market stability, implementing measures to enhance liquidity in the capital market, promoting corporate governance standards, and creating a favourable environment for new listings and the introduction of innovative financial instruments.

Earlier, on 16 March, the BSEC wrote a letter to the FID with several recommendations following the unrest which occurred on 5 March.

In a letter, the BSEC Chairman Khondoker Rashed Maqsood detailed the 5 March incident and urged the FID to take action to restore discipline in the capital market.

The recommendations include hiring armed Ansar for the security of critical infrastructure, forming a high-level investigation committee to ensure command chain integrity and taking action against those involved in terrorism and sabotage.

Other issues are reforming the commission's organisational structure, investigating the CMDB project funded by the Asian Development Bank and the government, and ensuring the security of the chairman and commissioners.

In the letter, Maqsood requested the public administration ministry, through the Financial Institutions Division, to appoint three executive directors, three directors, one commission secretary, and 12 joint or additional directors with degrees in economics, finance, commerce, accounting, statistics, mathematics, law, and information technology.

On 5 March, an unprecedented incident occurred at the commission building, stemming from the forced retirement of BSEC executive director Saifur Rahman.

In protest, employees launched a movement demanding the resignation of the BSEC chairman and three commissioners. At one point, they cut off the power supply to the commission building, effectively confining the senior officials.

Later, army personnel rescued the officials. The commission officials then announced a strike to press their four demands.

After discussions with the government, the chairman and commissioners returned to the BSEC building, stating they would continue with their actions against irregularities in the capital market.

The commission officials later withdrew the strike and resumed normal activities.

Following the 5 March incident, Maqsood's gunman Ashequr Rahman filed a case against some officials. One person was arrested but was later granted bail, along with the others involved.

Earlier on 3 February, another committee, led by the FID secretary, was formed for the development of the capital market. 

Currently, a task force is working on market reform

On 7 October last year, the Bangladesh Securities and Exchange Commission (BSEC) formed a task force to provide recommendations for much-needed reforms in the capital market.

The task force was assigned 17 initial terms of reference (TOR), with the flexibility to expand its scope as needed, according to the BSEC. Its primary objectives include driving the overall development of the capital market, enhancing investor confidence, and aligning capital market governance with international standards.

So far, the task force has submitted two reports in February this year, focusing on reforming margin loan rules and mutual fund regulations. However, no further outcomes or progress have been reported since then.

Meanwhile, on 11 September last year, the government formed a 12-member task force to reframe development strategies. The task force submitted its report in January, identifying key weaknesses in Bangladesh's financial system, including limited financial inclusion, underdeveloped capital markets, and inefficiencies in the banking sector.

The report highlighted issues such as politically influenced high non-performing loans (NPLs), poor corporate governance, and inadequate risk management, particularly in state-owned banks. The stock market, plagued by low investor confidence, lacks transparency and strong regulatory oversight, hindering business access to finance and stifling investment.

The task force emphasised the potential of the capital market to provide long-term funding for business but noted that stringent regulatory requirements, such as a minimum paid-up capital of Tk30 crore and mandatory profitability, deter IPOs. Additionally, the SME board, despite lower capital requirements, struggles to attract small and medium-sized companies due to insufficient market depth and liquidity.

The report underscores the urgent need for reforms in governance, regulation, and financial inclusion to strengthen the financial system and support economic growth.