Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has taken a move to minimize the valuation losses of government securities, held by the commercial banks, particularly the primary dealers (PDs), allowing them to keep more securities in maturity portfolio.

Under the latest move, the banks are allowed to meet their statutory liquidity ratio (SLR) up to 75 percent of securities which are treated as ‘held to maturity (HTM)’, instead of the existing 50 percent, according to a central bank circular.

The new provision will come into effect from October 01 this year, the central bank said in its circular, issued Thursday.

“The central bank has taken the move aiming to minimize the valuation losses of government securities, mostly held by the PDs,” a senior official of the Bangladesh Bank (BB) said on Thursday.

He also said the pressure on securities, which are treated as ‘held for trading (HFT),’ will ease for the PDs in the near future.

Currently, all scheduled banks except the banks operating under the Islamic Shariah and specialized banks, have to maintain 19 percent of their demand and time liabilities, along with 6.0 per as cash (known as cash reserve requirement or CRR) with the central bank, as the overall reserve requirement.

The central bank has allowed only PDs to submit bids in the primary auction of the government securities.

Currently, non-PD banks and financial institutions can take part in the auction only through the PDs.

The central bank earlier selected 15 PDs — 12 banks and three non-banking financial institutions (NBFIs) — to deal with government securities in the secondary market.

Currently, three Treasury-bills are being transacted through auctions to adjust the government borrowing from the banking system.

The T-bills have 91-day, 182-day and 364-day maturity periods.

On the other hand, four government bonds — five-year, 10-year, 15-year and 20-year — are being traded in the market.

BBN/SSR/AD-30Sept11-2:11 am (BST)