Yaoundé - 26 June 2022 -

Public securities: Cameroon plans a strategy to reduce banks' exposure to sovereign risks

Public securities: Cameroon plans a strategy to reduce banks' exposure to sovereign risks
  • Comments   -   Monday, 21 March 2022 14:52

(Business in Cameroon) - Cameroon is currently moving to attract non-bank actors to the public securities market, according to a recent country focus published by the International Monetary Fund (IMF).  

In the medium-term, this strategy is aimed at diversifying the investor base to boost the country's financing capability and at the same time building a strong investment and social protection culture.  

In that regard, in collaboration with the central bank BEAC, the country is elaborating a strategy to encourage those actors to invest in long-term securities, the country focus indicates.  

The specific details of the strategy have not been disclosed yet, but it will reduce banks' exposure to sovereign risk. 

Recently, the BEAC explained that the public securities market was exposing banks to sovereign risks. 

In its latest research paper, the central bank revealed that, in the CEMAC region, banks own almost 90% of the public securities issued in the debt market because of the illiquid secondary market.

In comparison, in 2020, the secondary debt market was 0.04% of GDP against 1.26% of GDP for the WAEMU, 4.21% for Morocco, and 4.21% in France.  

Also, the multiplication of public securities issuances could contribute to the erosion of foreign reserves and ultimately compromise external stability, the BEAC added. Therefore, the central bank issued several recommendations to avoid exposing banks to sovereign risks.  

One of the suggestions is that primary dealers must display public securities’ buy-sell prices and buy or sell at the prices when a potential investor shows interest per enforceable laws. 

Sylvain Andzongo

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