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          The Bangladesh Bank (BB) has further relaxed its regulation relating to swap transactions to boost the country's both money and foreign exchange (forex) markets, official sources said.
The new regulation allowed swap deals on the basis of counter-party limit instead of net open position of foreign exchange. The counter-party limit will be fixed in line with the existing core-risk management guidelines, the sources added.
Earlier, the dealer banks had to maintain the limit of the outstanding amount of swap within their net opening position of foreign exchange. The limit was determined by the central bank on the basis of the capital structure of the concerned authorised dealers.
The central bank took the measure aiming to meet the growing demand of foreign exchange through increased flow of the greenback in the market, sources in the central bank said.
They said the new regulation will facilitate transactions of foreign exchange and Bangladesh Taka (BDT) by the local and the multinational companies using the swap instrument.
The BB issued a circular Wednesday in this connection and asked the commercial banks to follow the new regulation to deal with the local and the foreign currencies through swap transactions.
Sources, however, said the Bb's regulation relating to forward forex deals remained unchanged to strictly cover at least 50 per cent.
Under the existing regulation, the dealer banks are required to cover the rest of the amount with forward inter-bank buy-deals and purchases against export bills.
The dealer banks may undertake swap transactions to cover their risks arising from forward transactions. However, they have been advised to refrain from taking speculative positions through swap transactions.
Sources said the banks are free to deal in forward buying and selling of foreign currencies in accordance with internationally established practices. However, in all cases the dealer banks must ensure that the cover is intended to neutralise the risk arising from definite and genuine transactions.
The central bank earlier identified five core risk areas in the country's banking sector. The risk factors are: credit, asset and liability, foreign exchange, internal control and compliance and money laundering.
The BB issued a circular in this connection and asked the concerned authorities to implement the guideline on management core risk in banking sector to improve their efficiency.
The fund managers of commercial banks welcomed the new regulation relating to swap transactions. They said the measures would have a positive impact on foreign exchange and money markets.
"It's a positive step to increase the flow of funds allowing counter party limit on swap transactions," a fund manager said, adding that a section of banks, which are performing well, will benefit under the new regulation.