Uganda’s Central Bank, the Bank of Uganda (BoU) has announced that all licensed commercial banks can henceforth have direct access to the primary market for Government security operations.
This means all 24 commercial banks licensed by BoU are now eligible to open Central Securities Depository (CSD) accounts at BoU for their clients, issue and accept bid submission forms on their behalf, settle their clients’ successful bids and buy their clients’ securities if the client wishes to sell.
Previously, only six Primary dealers including Stanbic bank, dfcu, Stanchart, Barclays, Bank of Baroda and Centenary Bank have been dealing in government securities.
This was revealed by BoU Governor, Prof. Emmanuel Tumusiime-Mutebile at the 12th Annual Primary Dealer Award Ceremony held at BoU head offices on Tuesday.
“This is part of BoU’s ongoing commitment to make investing in government securities easier and more accessible to the public. BoU has been working with various stakeholders on reforms to the Primary Dealership system, which are designed to improve the distribution mechanism for Government Securities,” Mutebile said.
“Prospective investors who want to open CSD accounts in order to trade in Treasury Bills or Bonds can now pick account opening forms not only from the Bank of Uganda banking hall and website, but also from any commercial bank,” Mutebile added.
He explained that instead of filling in multiple forms to open a CSD account, there will now be a simplified two-page CSD account opening form.
Also, investors who wish to participate in an auction where Government securities are first issued can now pick and submit bid forms at their commercial bank.
He added that the BoU will maintain a consultative approach with the market participants and other stakeholders so as to bring on board constructive initiatives that will further develop the financial markets in Uganda.
Stanbic Bank Uganda Ltd emerged the primary dealer of the year 2016 for the fifth consecutive year.
Mutebile noted that the Primary Dealer System aims to promote participation in government securities markets, to foster the development of financial markets, to improve the secondary market trading system as well as to ensure efficiency in the operations related to the Government securities market at the central bank.
“Primary Dealers have contributed to the growth of the Government securities market by ensuring high demand during primary market auctions,” he said.
In 2016, the ratio of primary dealer successful bids in the auctions relative to the rest of the market was 61 percent of all auction bids.
The auction bid to cover ratio, which is the total size of bids relative to the amount tendered, for treasury bills and bonds in 2016 averaged 1.21, indicating that demand for government securities is strong and sufficient to accommodate the needs of Government for domestic finance, Mutebile said.
Primary Dealers have also enhanced liquidity in the secondary market. Total turnover in the secondary market increased by 12.5 percent to Shs3.6 trillion in 2016, up from Shs3.2 trillion in 2015.