CEMAC: Commercial banks and their primary dealers hold 93.7% of government securities

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(Business in Cameroon) – At the end of 2020, 93.7% (XAF 3,021.2 billion) of government securities issued by CEMAC countries were held by commercial banks operating in this sub-region and their primary dealers. The remaining 6.3% was held by institutional investors (5.6%) and individuals (0.6%).

The data show a pronounced appetite of commercial banks for government securities from CEMAC countries, but another fact emerges. These include the eviction of other investors from the market; particular investors. These retail investors are mainly households and in Cameroon, at the end of February 2021, they contributed about 40.51% of the savings collected by these same commercial banks (according to the central bank BEAC).

Since primary dealers are omnipresent on the CEMAC government securities market, this financing mechanism does not always create money in the region. Also, the probability is high that the banks and their primary dealers will use the savings provided by households to subscribe to these securities.

In addition to depriving households of the profits they can generate with their savings, the increasing exposure of commercial banks to the government securities market firstly runs counter to the regulations which stipulate that commercial banks must sell a part of the government securities in their portfolio on the secondary capital market to consolidate their balance sheets and be able to continuously finance the 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 issue long-term securities).

Asked about the reasons for the low percentage of retail investors in the region’s government securities market, the primary dealers affirmed that the secondary market is not fluid and that the subscription process is laborious for these investors. The commercial banks that own these primary dealers seem to be doing nothing to encourage their clients to invest in government securities. For example, only a few customers are told by bank tellers about such opportunities that can help them grow their savings.

Idriss Lingé


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