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In front of the vulnerability of bank treasuries in the CEMAC zone, BEAC put final touches to a system of emergency liquidity provision

In front of the vulnerability of bank treasuries in the CEMAC zone, BEAC put final touches to a system of emergency liquidity provision
  • Comments   -   Saturday, 10 June 2017 07:35

(Business in Cameroon) - The Central Bank of Central African States (BEAC), issuing institution of the six countries in the CEMAC which are Cameroon, Congo, Gabon, Chad, Equatorial Guinea and the Central African Republic, is currently putting the final touches to the implementation of an emergency liquidity provision system to banks in this community.

According to the Governor of BEAC, Chadian Abbas Mahamat Tolli, this system planned as part of the reform of the monetary policy of this central bank, is “motivated by the regional situation characterised by the vulnerability of the treasury of several banks, particularly in conjunction with the financial difficulties of these States”.

The system, explains the Governor of BEAC, will consist “in providing, in a discretionary and exceptional manner, liquidity to a solvent financial institution, but suffering from serious liquidity tensions which could result in a major financial risk for the sub-region”.

Though he specified that with the current ongoing process, the Central Bank of CEMAC States is more “in a logic of anticipation” and that “the practical terms and conditions of this system will be finalised by the end of the year” 2017, Abbas Mahamat Tolli however pointed out that the BEAC monetary policy Committee “could face any emergency occurring before the end of the year”.

Indeed, according to authorised sources, the treasury of several banks operating in the CEMAC zone is in a critical position, and could trigger the above-mentioned system before the end of the year. Severely affected by the drop in oil revenues, which represent between 25% and 85% of public revenues in five oil producing countries in the CEMAC (apart from the Central African Republic), the six States in this community rushed to the capital market in search of finding for their operations and public expenditure.

This is how banks in the zone, who generally have as their main commercial partners States and state companies, have been increasingly solicited. Either for important withdrawals of funds, direct loans, or indirect loans, particularly via the public securities market launched by BEAC in November 2011, and where banking institutions in the CEMAC zone are almost all approved as primary dealers (Spécialistes en Valeurs du Trésor - SVT).

As an example, since the launch of this securities market, the States have officially raised over FCfa 4,000 billion on this market. Which represents approximately 40% of the FCfa 9,827 billion in banking deposits registered in the CEMAC zone at end July 2016.

Brice R. Mbodiam

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