Bangladesh's commercial banks, particularly the primary dealers (PDs), Wednesday urged the central bank to enhance their holdings in government securities to make up for the revaluation losses they count on public-debt instruments.
They sought enhancement of maximum limit of statutory liquidity ratio (SLR) under 'held-to-maturity (HTM)' category.
The appeal was made by the leaders of Primary Dealers Bangladesh Limited (PDBL) at a meeting held at the Bangladesh Bank (BB) headquarters in Dhaka with BB Deputy Governor A K M Sajedur Rahman Khan in the chair to help mitigate the revaluation losses on the securities.
The PDBL request comes against the backdrop of rising trend in the government-approved securities in recent months following the mopping up of excess liquidity by the central bank from the market.
A six-member PDBL delegation, headed by its chairman Md. Ataur Rahman Prodhan, attended the meeting.
At the meeting, the PDBL proposed that the central bank increase the maximum limit of holding the securities of SLR under HTM at 175 per cent instead of the existing level of 135 per cent for minimizing their revaluation losses on the public- debt instruments.
Currently, all the PD banks are allowed to meet their SLR with 135 per cent of such securities which are treated as HTM instead of the previous 125 per cent.
The PDBL also urged the BB to introduce a calculation method, officially known as re-measured category, for valuation of the holding of treasury bonds by the dealer banks to help minimise any adjustment losses.
Under the proposed system, the valuation of treasury bonds, issued from September 01, 2020 to September 30, 2021 and categorised as 'held for trading (HFT)' by the PDs, may be re-measured at an 'amortised cost', instead of 'marking-to-market system of valuation.
The leaders of PDBL also urged the central bank to enhance the tenure of assured liquidity support (ALS) for both treasury bills (T-bills) and Bangladesh Government Treasury Bonds (BGTBs) to help management of the fund properly.
"ALS may be allowed up to three months and 12 months from issue date for T-bills and BGTBs respectively instead of the existing tenure of two months," a senior PDBL member told the FE after the meeting.
After hearing various proposals as well as opinions of the PDBL leaders, the BB officials sought a proposal in writing from the leaders as early as possible for finding a way overcoming the prevailing situation.
"We'll take our decision on the issues after receiving the proposals from the PDBL," a BB senior official told the FE in reply to a query.
He also said the central bank is now analyzing data on the government securities to know real market situation.
At the same meeting, the PD banks were advised to expedite their participation to bring dynamism in the country's secondary bond market.
When contacted, another member of the PDBL said that they are now working to prepare the formal proposal for the central bank. "Hopefully, we'll submit the proposal to the BB within a couple of days."
The central bank earlier had selected 21 PDs to manage the government-approved securities on the secondary market.
