DMD Circular No. 02: Term Repo (360 Days) facilities to mitigate the crisis due to novel corona virus (COVID19)

Bangladesh Bank (Department of Management and Development) Head Office Motijheel, Dhaka-1000 Bangladesh.

DMD Circular No. 02 Date: -----------------------

To: Managing Director / Chief Executive Officer All Scheduled Banks and Financial Institutions operating in Bangladesh.

Dear Sir,

Regarding the introduction of a 360-day maturity special repo (repurchase agreement) to counter the impact of the novel corona virus (COVID-19).

You are informed that the spread of the novel corona virus (COVID-19) globally has had adverse effects on the economy of Bangladesh. To mitigate these effects, the Government and Bangladesh Bank have recently announced various financial stimulus packages. To ensure smooth liquidity management in the money market for the implementation of the aforementioned stimulus packages, the following 360-day maturity special repo (repurchase agreement) has been introduced:

1. Based on the existing repo rate, the interest rate and amount of the special repo (repurchase agreement) announced by Bangladesh Bank, considering the monetary policy and money market liquidity situation, will be determined by the Auction Committee of Bangladesh Bank at each auction. The decision of the Auction Committee at each auction shall be final.

2. Participating scheduled banks and financial institutions may obtain funds from this authority by depositing government securities held in excess of their SLR (Statutory Liquidity Ratio) as collateral with Bangladesh Bank. Such repo transactions shall be considered as SLR adjustment transactions subject to compliance with the relevant regulations.

3. The remaining amount of the face value, after applying a haircut of 15% to Treasury Bills and 5% to Bonds respectively, will be provided as repo. In such repos, the pledged entire securities (market value/face value) shall be considered as encumbered assets and these securities shall not be considered as collateral or liquid assets for any other purpose.

4. The funds obtained through this repo must be utilized for the implementation of the various financial stimulus packages recently announced. The sectors in which these funds are invested must be reported monthly to the Department of Management and Development of Bangladesh Bank.

5. The funds obtained through this repo shall not be invested in government securities or Bangladesh Bank bills without prior approval from the Department of Management and Development of Bangladesh Bank.

6. Banks and financial institutions shall submit bids to Bangladesh Bank in accordance with existing rules.

This directive shall come into force immediately and this arrangement shall remain in force until further orders.

Yours faithfully,

(Md. Khurshid Alam) General Manager Phone: 9530131 E-mail: khurshid.alm@dmd.bb.org.bd

30 Ashakh, 1427 Bang 13 May, 2020 AD