BSEC Allows CDBL To Work As Mutual Fund Custodian In Capital Market Reform

🏛 The securities regulator has allowed Central Depository Bangladesh Ltd. (CDBL) to work as the custodian of mutual funds (MFs). To this effect, the depository authority this week received a consent letter from the Bangladesh Securities and Exchange Commission (BSEC). CDBL's Managing Director Md. Abdul Mutaleb confirmed this to The Financial Express.

📊 To expand its portfolio, the depository authority, which so far has provided only depository services, applied for a licence to work as the custodian of MFs. The development comes at a time when MF custodians are facing heavy criticism for their failure to prevent scams in fund management. Mr Mutaleb said they would exercise professionalism in securing the interests of unitholders of pooled funds.

📜 Regulatory Framework: One Role Per Organisation

As per the latest rules for MFs, an organisation will not be allowed to play more than one role in the management of MFs. Some organisations, including the Investment Corporation of Bangladesh (ICB), are working both as trustee and custodian. They will have to reduce their responsibility in those funds. CDBL is expecting to take over the charge.

• 🏛 New custodian: CDBL (Central Depository Bangladesh Ltd)
• 📜 Regulatory approval: BSEC consent letter
• 📜 CDBL MD: Md. Abdul Mutaleb
• 💰 Settlement fee: Tk 25 per Tk 0.1 million transaction
• ⚠ Previous concern: MF custodians failed to prevent scams
• 📜 Rule change: One organisation cannot hold multiple MF roles
• 🏛 Affected: ICB (currently both trustee and custodian)

💰 CDBL's Revenue Diversification Strategy

Meanwhile, CDBL's operating profit has endured a sharp decline, a reason why the company seeks to expand its portfolio through custodianship of MFs. The company receives Tk 25 for every settlement of listed securities worth Tk 0.1 million. The lower the daily transactions in the capital market, the lower CDBL's earnings from securities settlements. The revenue diversification into MF custodianship addresses CDBL's structural vulnerability — its current business model is entirely dependent on capital market transaction volumes, which have been declining as the DSE has experienced sustained low turnover.

"Some asset management companies have talked to us to engage us as the custodian of their funds," Mr Mutaleb said. The early interest from asset management companies suggests that there is market demand for an alternative custodian — particularly one with CDBL's institutional credibility as the central depository infrastructure operator.

🌏 Strategic Context: Capital Market Governance Reform

For Bangladesh's broader capital market governance, the CDBL custodianship approval represents a meaningful structural reform. The separation of trustee and custodian roles — preventing a single organisation from holding both positions — is a fundamental principle of mutual fund governance that ensures checks and balances in fund management. When the same organisation serves as both trustee and custodian, the potential for conflicts of interest increases, as the organisation responsible for safeguarding fund assets (custodian) is also responsible for overseeing fund operations (trustee).

The BSEC's enforcement of the one-role-per-organisation rule, combined with CDBL's entry as a credible alternative custodian, creates the structural conditions for stronger fund governance. Asset management companies that previously relied on ICB or other dual-role institutions for custodianship now have a credible alternative in CDBL — whose institutional infrastructure and regulatory oversight as the central depository provide a higher level of asset safeguarding.

The coming months will reveal whether CDBL can successfully transition from a pure depository service provider to a multi-function capital market infrastructure institution — and whether the custodianship expansion meaningfully improves mutual fund governance standards in Bangladesh's capital market.