‘CSDs guard against financial risks’
Central Securities Depositories(CSDs) are an important component to the capital market, as they play a crucial role in mitigating risk in the industry, one of Bank of Botswana’s (BoB) deputy Governors, Andrew Motsomi has told a conference.
He was speaking at the 27th meeting of the Africa Middle East Depositories Association (AMEDA) meeting in Kasane on Tuesday. “There is indeed no doubt that securities depositories play a critical role with respect to mitigation and management of systemic risk and the promotion of the stability and integrity of financial markets, both on the domestic front as well as across the world,” noted Motsomi. A central securities depository (CSD), is generally defined as a specialist financial entity which holds securities such as shares either in certificated or uncertificated form so that ownership can be easily transferred through a book entry rather than the transfer of physical certificates. In Botswana, this function is performed by Central Securities Depository Botswana (CSDB) which is headed by Masego Pheto.
According to the BoB’s second in command, securities regulators are required to play an increasingly pivotal role in addressing systemic risk, particularly in the context of the lessons drawn from the global financial crisis pertaining to systemic risk and promotion of financial stability. Motsomi was referring to the 2008/9 financial crisis which crushed markets globally. According to Motsomi, the introduction of the CSDB by the BSE a decade ago marked a critical milestone in the evolution of the national payment systems in Botswana.
“The CSD system has significantly transformed the operations of the capital markets in the country, by inter-alia, improving the safety of investor assets, improving the efficiencies and integrity of securities market transactions as well as contributing to the minimisation and mitigation of systemic risk,” stated. Since its establishment, the CSBD continue to be well received by international investors and rating agencies.
This is reflected by the year on year growth of foreign investor participation in the domestic bourse.
“The evolution of CSDs to position themselves as a one-stop-shop is commendable, though the pace of evolution may not be the same in every market,” noted Motsomi as a matter of fact.
There has been a notable trend and transition from traditional core services of registry, custody and reporting to a more diversified service of products and services which include inter-alia, liquidity management, cross border settlement, collateral management, payments gateways, e-voting, e-IPOs, trade repositories and fund trustee management, securities borrowing and lending.
“Equally, CSDs have significantly evolved to embrace investor outreach initiatives helping the regulators and the supervisory bodies to shoulder this task,” he added.
He urged AMEDA to develop focus groups that can explore the integration of these core and added services among its members, and create a conducive environment for others to hand hold others. According to background information from BSE’s head of market development, Thapelo Moribame, the AMEDA meetings are dedicated towards the review of the association’s financial performance, as well as conducting workshops on the relevant topics that impact the operations of the Central Securities Depositories in the AMEDA region.
AMEDA is a non-profit organization comprised of Central Securities Depositories and Clearing Houses in Africa & the Middle East and was formed for the benefit of its member community, as an elective, inter-professional and regional facility geared towards fostering the spirit of cooperation, reciprocity and harmony among members.