The Central Bank of Kenya (CBK) has introduced a modernized Central Securities Depository (CSD) called CBK DhowCSD, which will revolutionize the way investors trade Treasury bills and bonds. With the new electronic over-the-counter platform, manual bids and payments for securities at the CBK will no longer be possible. Instead, investors will conduct all their transactions through DhowCSD, making trading more convenient and improving liquidity.
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According to CBK, one of the key benefits of the new CSD is its potential to attract significant investments from Kenyans abroad. The CBK anticipates tapping into over Sh406 billion ($2.86 billion) from Kenyan expatriates, who remitted a total of $4 billion (Sh569 billion) to the country in the previous year. The platform aims to facilitate more accessible avenues for Kenyans abroad to invest in government debt. The transition to the new CSD will involve transferring existing account holders’ details from manual and mobile direct services to DhowCSD. In light of this, investors should be aware that the CBK will no longer accept cash or cheque deposits for Treasury bills and bonds payments. Going forward, all payments will be processed through commercial banks.
In addition to streamlining trading processes, CBK DhowCSD is expected to enhance pricing efficiency and transparency in securities trading, ultimately leading to lower yields. Additionally, the platform will enable banks to engage in collateral exchange with one another, allowing smaller banks to access more favourable interbank rates. This horizontal repo mechanism is vital for balancing the interbank market, where larger banks currently enjoy more liquidity compared to their smaller counterparts.
As the system continues to evolve, banks will explore ways to let their customers borrow against their securities. The modernized CSD promises to bring numerous advantages to investors, traders, and banks, creating a more efficient and accessible environment for buying and selling government debt securities.
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