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Finance

CEMAC: Repo-facilitated interbank borrowings almost doubled YoY in 2021

CEMAC: Repo-facilitated interbank borrowings almost doubled YoY in 2021
  • Comments   -   Wednesday, 19 January 2022 16:32

(Business in Cameroon) - In 2021, the volume of interbank borrowings through the repo agreement rose by almost 100% in the CEMAC, a recent report by the central bank BEAC revealed. According to the report, XAF833.7 billion was borrowed through that mechanism in 2021, against XAF418.4 billion in 2020. 

The repo mechanism appears then as a catalyst of transactions on the secondary public securities market which are deemed not dynamic on the CEMAC region because of the low volume of public securities exchanged on the market (officially, 80% of the public securities are still held by the banks that bought them in the primary market where they act as primary dealers). 

The reason the repo mechanism is so successful in facilitating interbank borrowings is that it guarantees a successful conclusion of transactions. Indeed, according to BEAC experts, the repo mechanism is an interbank funding method consisting of an exchange of securities against cash for a set period. In the framework of the mechanisms, the parties sign a framework agreement according to which the lender will automatically become the owner of the securities deposited as collateral if the borrower does not pay before the deadline.

“There is no need to go to courts to obtain a transfer of ownership,”  explained Aboubakar Salao (a member of the BEAC audit commission) in September 2018 during a seminar organized by the International Finance Corporation (IFC) on the challenges and opportunities in the Central African capital market.

According to BEAC data, the introduction of the repo mechanism in the interbank borrowing scheme in the CEMAC region, in 2014, boosted interbank transactions by about 300% in 2019. 

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