SEBON Chair Bhatta: New risk- and governance-based regulatory strategy being implemented in the capital market
The Securities Board of Nepal (SEBON) has adopted a new risk- and governance-based regulatory strategy to make the capital market orderly and secure. Chair Dr. Gopal Prasad Bhatta stated that a Central Counterparty (CCP) is indispensable for ensuring the settlement of share and derivative transactions in the secondary market, and the Board is studying the capacity development of CDSC.
Dr. Gopal Prasad Bhatta, Chair of the Securities Board of Nepal (SEBON), said that the Board has adopted a new risk- and governance-based regulatory strategy to make the capital market orderly and secure. Speaking at a meeting of the Finance Committee under the House of Representatives, he informed that necessary institutional structures and systemic reforms are being advanced to modernize the market.
Chair Bhatta stated that a Central Counterparty (CCP) has become indispensable for ensuring the settlement of share and derivative transactions in the secondary market. “An institution like a CCP, which acts as a guarantor between the buyer and the seller, must either be established separately by NEPSE or CDSC should be given the responsibility after developing its infrastructure,” he said. “To this end, the Board is conducting studies and preparations to develop the capacity of CDSC.”
Chair Bhatta clarified that the Board is carrying out policy reforms based on four main principles for the stability of the economy and the capital market. These principles are:
- Risk-based supervision
- Entry into the capital market only for companies with strong governance
- Preventing the transfer of depositors' risk to share investors
- Strict regulation in high-risk areas as per international practice
According to him, strict regulation and supervision will now be carried out in areas with higher risk, in line with international practice. “Since public capital is being mobilized, only companies with strong governance will be allowed to enter the capital market,” he said.
Citing the example of Karnali Development Bank, Chair Bhatta said that coordination is being carried out with Nepal Rastra Bank to prevent the transfer of depositors' risk to share investors.