(Business in Cameroon) - Between January and March 2021, the main factor that pushed most banks to participate in the BEAC’s liquidity injection operations was the deterioration of their credit portfolio, according to the central bank’s analysts. "Indeed, the ratio of non-performing loans in those banks’ portfolio is higher than the average recorded since January 2021 (…) Therefore, their refinancing applications could (…) be the consequence of the liquidity need generated by a degradation of the quality of their portfolio," the BEAC wrote in its latest research report.
Although most banks’ participation in the operation was due to the poor quality of their portfolio, the liquidity injection operations did benefit CEMAC economic agents. Indeed, between March 2020 and March 2021, the volume of credits granted by banks to economic operators rose by XAF283 billion thanks to the operations. The same trend was observed in the financial supports those banks provided to states by investing in public securities deemed safer.
"The volume of public securities owned by credit institutions that took part in the central bank’s refinancing operations was relatively stable in the first quarter of 2020. Starting from May 2020, that volume initiated a rising trend and the highest upticks were observed between November 2020 and March 2021. This suggests that the resumption of active injections by the BEAC may have favored the financial support provided by some banks to governments through the public securities market during the Covid-19 crisis, reflecting a preference for less risky assets than credits to the economy, particularly in times of uncertainty," the central bank adds in its research report.