Treasury bill

Treasury Bills issued by the government as an important tool of raising public finance and up to 1994, were of three types, although all of them were 90-day bills. Among these three types, bulk was represented by ad-hoc treasury bills issued to meet the cash balance need of the government. A second type was the 3-months treasury bills on tap introduced in August 1972 and their purpose was to mop up the excess liquidity of banks. The third type was the 3-months treasury bills introduced for subscription exclusively by the non-bank financial institutions, non-financial enterprises and the public.

Initially,  a  limit  of  Tk  250  million  was  set  for  the  issue  of  such  treasury  bills.  Later  this  limit  was withdrawn and Bangladesh Bank was empowered to issue any amount of treasury bills for the non-bank public. Despite the withdrawal of the limit, the holdings of non-banking sectors remained small and commercial banks comprised the main market for the treasury bills. These bills continued to be reissued in every ninety days. In December 1994, however, treasury bills on tap and the treasury bills for non- banks were abolished.  The holdings of treasury bills by the deposit money banks generally did not exceed the amount needed to meet the liquidity requirement. A substantial part of the treasury bills issued, therefore, needed to be held by Bangladesh Bank. Of the total treasury bill holdings, the amount of holdings by the deposit money banks was 57% at the end of 1973 and amidst fluctuation, they came down to 27% at the end of June 1982. Later, the share started to rise and stood at 68% at the end of

1992. Thereafter, it fell sharply and came down to a lowest minimum of 4% at the end of June 1995.

That  the  Bangladesh  Bank  bills  were  allowed  as  approved  securities  for  the  statutory  liquidity requirement of the banks and these bills were of yields higher than the treasury bill rate, might have induced the banks to reduce their holdings of treasury bills. This trend continued up to February 1997. In March 1997, the auctioning of Bangladesh Bank bills was suspended and only the 90-day treasury bills were sold through auction. Up to 25 October 1995, the treasury bills of ninety days maturity were sold at pre-determined rate, usually fixed time to time by the government. Thereafter, these were sold through  auction  at  market  determined  rate  of  interest.  Subsequently,  on  7  February  1996,  the government introduced 30-days and 180-days treasury bills and on 16 March 1997, 1-year treasury bills for auction. Up to August 1998, four categories of treasury bills viz, 30-day, 90-day, 180-day and 1-year bills were sold regularly through weekly auction basis. From 6 September 1998, these were replaced by newly introduced 28-days, 91-days, 182-days, 364-days, 2-years and 5-years treasury bills.

Riskweighted assets

 Risk-weighted  asset  is  a  bank's  assets  weighted  according  to  credit  risk.  Some  assets,  such  as debentures, are assigned a higher risk than others, such as cash or government securities/bonds. Since different types of assets have different risk profiles, weighing assets based on the level of risk associated with them primarily adjusts for assets that are less risky by allowing banks  to "discount" lower-risk assets.

This sort of asset calculation is used in determining the capital requirement or Capital

Adequacy Ratio (CAR) for a financial institution, and is regulated by the Local Central Banks or other National financial regulators. The specifics of CAR calculation vary from country to country, but general approaches tend to be similar for countries that apply the Basel Accords. In the most basic application, government debt is allowed a 0% "risk weighting" - that is, they are subtracted from total assets for purposes of calculating the CAR.

Demated securities

 Demate   means   Conversion   of physical   securities   into electronic   form-the   move  from  physical certificates to electronic book keeping. Actual stock certificates are slowly being removed and retired from circulation in exchange for electronic recording. With the age of computers and the Depository Trust  Company,  securities  no  longer  need  to  be  in  certificate  form.  They can  be  registered  and transferred electronically.

Participants:

·         Investors

·         CDBL[central depository Bangladesh ltd.]

·         The Depository Participants

·         The Issuing Company

Bank rate

The bank rate is the rate of interest at which BB re-discounts the first class bills of exchange from commercial banks. Whenever BB wants to reduce credit, the bank rate is raised and whenever the volume of bank credit is to be expanded the bank rate is lowered. This is because by change in the bank rate. BB seeks to influence the cost of bank credit. The efficacy of bank rate policy depends, to a greater extent, on its power to influence the market rates. There is no organized money market in our country and thereby the market rates seldom respond to bank rate changes. The absence of any kind of conventional relationship between the central bank and other components of the money market further adds to the ineffectiveness of the bank rate policy.