Muhith pledges overhaul of Companies Act
The government has pledged to restructure the Companies Act as part of the financial sector reforms, a prerequisite to economic development.
"We're going to take a number of steps to reform this sector….Reforming the Companies Act would be our next agenda," Finance Minister AMA Muhith said yesterday while announcing the budget for the next fiscal.
He said automation of all activities of Bangladesh Bank will also be a significant step to this end, as it aims at enhancing the central bank's efficiency to play a more effective role in the financial sector.
As part of the automation, Muhith said, connectivity has already been established among all divisions/offices of Bangladesh Bank to ensure an inter-bank networking. "The Credit Information Bureau of Bangladesh Bank has begun providing online services in order to effectively store data on the clients of banks and financial institutions."
This year a new division called Banking and Financial Institutions Division has been created under the Ministry of Finance, he said, adding that distribution of responsibilities between this division and other regulatory financial institutions such as Bangladesh Bank, Securities and Exchange Commission (SEC) and Insurance Development and Regulatory Authority is now under process.
"In the next year, the regulatory regime relating to banking and financial institutions will be reformed and the rules governing SEC will be revisited, " he said.
The finance minister said the sovereign credit rating on Bangladesh for the first time by two internationally reputed agencies is a remarkable aspect of the country's financial sector. "Recently, Standard and Poor's (S&P) and Moody have enlisted Bangladesh in their Sovereign Credit Rating system giving us BB- and Ba3 ratings respectively," he said.
The ratings mean Bangladesh has earned the equivalent status of the Philippines, Indonesia and Vietnam in terms of loan repayments. Though in South Asia, Bangladesh is behind India, it enjoys a higher status in comparison with Pakistan and Sri Lanka.
Muhith expected that the ratings will facilitate higher foreign direct investment flows, reduce the cost of Letters of Credit (LC) and as a result, imports will be cost-effective and exporters will be benefited.
"Our industrial and commercial undertakings should also be aware of their own credit ratings and for which we will allow more professional credit rating agencies to work in the country."
The minister said in order to raise the level of efficiency of the banking sector to international standard by further strengthening their activities, and to make capital reserve more risk tolerant and stronger.
The implementation of Basel-2 has started from January 1, which will establish a direct linkage between risk management and risk-based capital adequacy requirement in the banking sector, he said.
"Another remarkable achievement in the banking sector development is the establishment of Bangladesh Development Bank Ltd by unifying Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Shangstha (BSRS) as a specialised bank to provide loan facilities to industrial institutions and to assist in setting up new industries in our country," he said.
Muhith said in order to make the programme for prevention of money laundering more effective 'Money Laundering Prevention Act 2009' and 'Antiterrorism Act 2009' have been enacted.
A Financial Intelligence Unit (FIU) has also been established in the Bangladesh Bank under the anti-money laundering law. "Memoranda of Understanding (MoU) have also been signed with seven countries for mutual exchange of information with foreign FIUs on cash smuggling and financial transactions," he added.
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