Beruflich Dokumente
Kultur Dokumente
of economy in Bangladesh
Abstract
This report highlights recent economic updates in Bangladesh as of April
2015. Economic growth in Bangladesh was gaining momentum in the first
half of FY15. Capacity utilization improved and investments were showing
some signs of recovery. This growth was also job-friendly. The 12-monthlymoving average inflation decelerated from 7.6 percent in February 2014 to
6.8 percent in February 2015. Investment banks play an important and
active role in the economic development of a country. If the banking
system in a country is effective, efficient and disciplined it brings about a
rapid growth in the various sectors of the economy. There are two broadly
recognized functions of investment banks capital market intermediation
and trading. These are distinct and separate from the functions typically
associated with commercial banks, which accept deposits and make loans.
Investment banks are critical agents of capital formation and price setting.
They also help to coordinate present and future consumption. In
contemporary mixed economies, both governments and large companies
rely on investment banks to raise funds. Historically, investment banks
match those selling securities with those investors. This is known as
"adding liquidity" to a market. For their role, investment bankers are
rewarded as intermediaries, or middlemen. By matching producers with
savers, financial development becomes more efficient and businesses
grow more quickly. Investment banks work with commercial banks to help
determine prevailing market interest rates. Even though there are different
interest rates for commercial and investment products, all interest rates
influence each other.
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TABLE OF CONTENT
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Serial No
Particulars
Abstract
Pages No
*
Introduction
5- 7
Investment Banking and Growth
8-9
Investment Banking Activities
9
Economic
Environment
and
sector
in 10
Bangladesh
Factors relating to the Economic Development 10-11
of Bangladesh
Function of Investment Bank & Its Role in 11-12
Economic Development
Investment Bank scenario in Bangladesh
Sample Bank (Importance/ Contribution of
13-14
15
17
18
Reference
19
Introduction
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for
mergers,
acquisitions
and
other
types
of
financial
4|Page
However, only a few small firms provide only this service. Almost all
investment banks are heavily involved in providing additional financial
services for clients, such as the trading of derivatives, fixed income, and
foreign exchange, commodity, and equity securities.
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Investment Banking
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Financial Intermediation
Financial Intermediation
Financial
Financial
Advisory
Advisory
Primary
Primary
Market
Market
Secondary
Secondary
Market
Market
Proprietary Trading
Proprietary Trading
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Governance
Export competitiveness
Urbanization
The financial sector
Education
Rural Development
Social Welfare
Women and Children Affairs
Youth Development
Education of Bangladesh
Banks accumulate small saving from public and thus form large amount of
capital. Banks invest this capital as the form of loan and advances and
direct investment in profitable sector. By investing capital in productive
sector will boost up the economy of a country.
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invest their savings at any time of the year. The fund is divided into units
known generally as ICB units, each of which bears a certain value in the
assets of the fund. These units are sold to the public. Bangladeshi citizens
living abroad and foreigners residing in the country can also purchase ICB
units. Unit holders are the owners of the fund, while ICB takes the
responsibility of managing the fund and loading and unloading securities
in their interest. ICB floated its first mutual fund in 1980 and the number of
its mutual funds increased to 8 by 2000.The total paid up capital of the
mutual funds is Tk 175 million. In 2001, the corporation disclosed its
decision to issue the 9th mutual fund of Tk 100 million.
In addition to ICB, a number of commercial banks also carry out investment
banking
functions
in
Bangladesh.
The
Securities
and
Exchange
Commission (SEC) has set the minimum paid-up capital requirement for
full-fledged merchant banks to Tk 25 crore. Through the Merchant Bankers
and Portfolio Manager Rules 1996, Securities and Exchange Commission
specified the minimum paid-up capital requirement for different merchant
banking activities. For issue management the minimum paid-up capital
would be Tk 2.5 crore, for under-writing issues and portfolio management,
the minimum paid-up capital would be Tk 12.50 crore. The SEC has a code
of conduct for issue managers, underwriters and portfolio managers and is
empowered to suspend or cancel the certificate of registration for its
violation. [Jamal Uddin Ahmed]
Sample Bank
Importance/ Contribution of Banks in Economic Development: Brac Bank
channelize fund for development and growth of a specific sector of the
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2007
Fisheries,24
2008
31,
401
2009
435
March30,
June
2009
560
Forestation
1. Agriculture
2. Fisheries
3. Forestation
Industry
1. Large & Medium
204
314
392
1000
39
139
700
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275
367
253
467
300
520
Capital
Utility supplied Loan
Transportation
1550
2931
3366
5238
1284
2233
2866
4143
111
136
48
95
155
562
452
1000
Different Sector
1092
1808
2035
3000
Total Loan
2870
5721
6695
10318
Communication
Trade & Commerce
1. Retail
&
2. Export
3. Import
4. Hotel & Restaurant.
Analysis: From the above table we see that in the year 2007 the industrial
sector was TK. 24 million but in 2008 it is increasing by 157% i.e. from 24 to
401 million. And in the year 2008-2009 it was increased by 79%. In the
agricultural sector in 2007 was Tk. 204 million but in 2008 it was increased
by 53%. In Trade and commerce the increase is 89%. And the overall loan
providing rate is increasing 2008-2009 is 102% and 2008- end of June 2009
it was 77% increasing. (Brac Bank website)
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Empirical Literature
Empirical literature on finance and growth deals with financial development
in general, which may include the development of the banking sector, stock
market and legal environment. Unlike with theoretical literature however,
the results of these empirical studies cannot be explicitly interpreted for
investment banking. Nevertheless, since investment banking can be
regarded as a part of financial development, the results presented in the
following may indicate a tendency for the effect of investment banking on
the economy.
Empirical Analysis of the Contributions of Investment Banking to the
Economy
An indepth analysis on the use and the perceived benefits of investment
banking products, especially mergers and acquisitions (M&A) advisory by
Bangladeshi companies is conducted. This research is based on a survey
among some companies. This survey is extended to further questions in
the upcoming parts of the study. Throughout the analysis of all parts of the
survey we, inter alia, investigate whether there are significant differences
between companies of different size. In the M&A section, we address the
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Recommendation
In analyzing the banking operation of the Brac bank we find the following
gaps in terms of its practices.
In the annual balance sheet of The Brac bank we find that they did
not provide any loan in infrastructural and communicational
development of the country. We analyze the balance sheet of the
banks in the year on 2007, 2008 and 2009 and we find that the
balance sheet shows in nil in the sector of Building development,
Utility supply sector and in Transportation and communication
sector. But without the development sector an economy cannot
develop. So, the bank has to consider providing loan in these
sectors which ensure his role in economic development of our
country.
In analyzing the balance sheet in the year 2007, 2008 and 2009 that
the bank have not take any role if the poverty development. They will
not expanses any fund in this sector. So, the bank has to provide
finance in this sector which ensures the development of the
economy of a country.
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Concluding Remarks
In summary, a single investment bank is rather unlikely to impose a risk
spillover upon an entire financial sector. The estimated response of
financial institution groups such as insurance companies, commercial
banks, hedge funds and even the remaining investment banks is very small
compared to the initial shock experienced by a single investment bank. A
single bank obviously does not have enough influence to move a market
segment. Taking into consideration that shocks mostly affect an entire
sector at once, the spillovers originating from the investment bank
portfolio are of greater relevance for the stability of the financial system.
When the entire investment bank sector experiences a shock, the response
by the other financial sectors is more eminent, but remains relatively small.
Interestingly, hedge funds are identified as the main source of systemic
risk for financial institutions and especially for investment banks. The
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References:
i.
ii.
www.bb.org
iii.
http://www.bis.org/publ/otc_hy1105.pdf
iv.
http://citeseerx.ist.psu.edu/viewdoc/download?
doi=10.1.1.167.4223&re p=rep1&type=pdf.
v.
www.google.com
vi.
www.bracbankbd.com
vii.
www.icb.com
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