REMARKS BY THE CAPITAL MARKETS AUTHORITY ACTING CHIEF EXECUTIVE, MR PAUL MUTHAURA, DURING THE LAUNCH OF THE NEW MODEL FOR THE SETTLEMENT OF SECURITIES TO CENTRAL BANK MONEY, 27 JANUARY 2015, THE STANLEY HOTEL, NAIROBI
The CDSC Chief Executive, Mrs Rose Mambo;
The NSE Acting Chief Executive, Mr Andrew Wachira;
The CBK Governor, Prof Njuguna Ndungu;
The KASIB Chairman, Mr Jimnah Mbaru;
Board members of CDSC, CBK, NSE, and KASIB present;
Ladies and Gentlemen;
All protocols observed;
I join my colleagues in celebrating the event today as a major milestone in the history of the capital markets borne out of a collaborative initiative between CDSC, CBK, and CMA with the support of market players. This is a good example of the benefits of joint efforts to address issues in the financial markets, and evidence of our joint commitment to positioning Kenya as the pre-eminent investment destination on the continent.
The launch of this key initiative comes at a time when the prestigious Fortune magazine has named Kenya among the 7 countries around the globe recommended as the most attractive investment destinations due to political stability and sound macro-economic management. Having been singled out on the continent we should expect a significant increase in portfolio inflows in the short to medium term. In this regard clearing and settlement efficiency and integrity will take on increasing importance reinforcing that this initiative has come at a most opportune time.
The move of the cash settlement of securities from commercial banks to central bank money is part of the strategy towards modernization of the capital markets infrastructure and moves Kenya towards full compliance with the CPMI - IOSCO Standards for Financial Markets Infrastructures. The Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) work together to enhance coordination of standards and policy development and implementation, regarding clearing, settlement, and reporting arrangements including financial market infrastructures (FMIs) worldwide.
This is the first step towards strengthening the markets capacity to mitigate and manage systemic infrastructure risk in order to increasingly shore up confidence in the Kenyan capital market. The first phase settlement in central bank monemakeovers us all the closer to our ambition to transform the country into a Regional and International Financial Centre as espoused in the Capital Market Master Plan and the Vision 2030 Economic Blueprint. It also moves Kenya towards full delivery-versus-payment (DVP), to ensure minimal risk is associated with securities trading through real-time settlement as well as being a necessary pre-condition for integrating Government bond settlement.
It also reduces costs and errors, enables faster processing and develops a central corporate actions service, providing both registrars and investors with a single gateway for the distribution of income from securities’ trading.
This arrangement is expected to boost foreign and domestic investor confidence in the Kenyan market and promote greater liquidity at the Nairobi Securities Exchange.
As I conclude, I would urge the National Treasury to continue spearheading the consolidation of the two domestic Central Securities Depositories as we position ourselves towards integrating the capital markets infrastructure within the EAC. In the short run, the Authority will be working with all relevant parties towards facilitating the euroclearability of debt instruments such as the Treasury bonds and the Eurobond.
We look forward to a very vibrant year in the capital markets and look forward to greater participation by all stakeholders.