Yaoundé - 08 May 2021 -

CEMAC: Commercial banks and their primary dealers own 93.7% of public securities

CEMAC: Commercial banks and their primary dealers own 93.7% of public securities
  • Comments   -   Tuesday, 04 May 2021 02:54

(Business in Cameroon) - At the end of 2020, 93.7% (XAF3021.2 billion) of the public securities issued by CEMAC countries were owned by commercial banks operating in that sub-region and their primary dealers. The remaining 6.3% were owned by institutional (5.6%) and retail investors (0.6%).

The data demonstrate commercial banks’ pronounced appetite for CEMAC countries’ public securities but another fact emerges. This is namely the eviction of other investors from the market; retail investors notably. Those retail investors are mostly households and in Cameroon, at the end-February 2021, they contributed about 40.51% of the savings collected by those same commercial banks (according to the central bank BEAC).

As primary dealers are ever-present in the CEMAC public securities market, that funding mechanism does not always create money in the region. Also, the probability is high that banks and their primary dealers are using the savings contributed by households to subscribe to those securities.

Apart from depriving households of the profits they can generate with their savings, commercial banks' rising exposure to the public securities market is first against the regulation that provides that commercial banks must sell part of the public securities in their portfolio on the secondary capital market to consolidate their balance sheet and be able to continuously fund economies (especially now that member countries are issuing long-term securities). Their exposure also affects the functioning of the secondary capital market (especially now that member countries are issuing long-term securities).

When interviewed on the reasons there is such a low percentage of retail investors in the region’s public securities market, primary dealers claim that the secondary market is not fluid and that the subscription process is painstaking for those investors. Commercial banks that own those primary dealers seem not to be doing anything to encourage their clients to invest in public securities. For instance, just a few clients are informed by bank cashiers about such opportunities that can help them fructify their savings.

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