CBK Opens Govt Securities Market to Foreign Investors: How It Will Work

The Central Bank of Kenya (CBK) and Clearstream have launched a new market link that will provide international investors with easier access to Kenyan government securities, a move expected to deepen liquidity and expand the country’s investor base.

In a statement issued on June 25, the Central Bank of Kenya (CBK) said the Clearstream-Kenya Link connects Clearstream to Kenya’s Government Central Securities Depository (DhowCSD), allowing institutional investors to access government bonds, infrastructure bonds, and Treasury bills through a single omnibus account structure.

“The Central Bank of Kenya welcomes the establishment of the Clearstream-Kenya Link, which is expected to provide efficient access by international investors to Kenyan Government securities, supported by the Government Central Securities Depository (DhowCSD). Clearstream’s connection to the DhowCSD will provide institutional investors with efficient access to the local market through a unique omnibus account structure,” read part of the statement.

Clearstream operates the central securities depositories of Germany and Luxembourg, as well as an international central securities depository serving the Eurobond market.

CBK Expands Foreign Access to Kenya’s Government Securities Market

CBK described the development as a major milestone in the growth of Kenya’s financial markets, saying it will enhance the resilience of the domestic debt market while attracting more foreign capital.

Under the arrangement, international investors will be able to invest in Kenyan government securities through Clearstream’s global network without the need to open local accounts or undergo separate registration processes.

The new connection makes Kenya Clearstream’s 60th domestic market link globally and only the second in Africa after South Africa.

Also Read: CBK Reveals Number of Kenyan Banks Yet to Meet Ksh3 Billion Capital Requirement

How the Clearstream–Kenya Link Will Work

The new link will allow international investors to buy Kenyan government securities without opening accounts in Kenya or undergoing local registration.

Here’s how it will work:

• Investors Access Kenya Through Clearstream
  • Institutional investors already connected to Clearstream will be able to purchase Kenyan government bonds, infrastructure bonds, and Treasury bills through their existing Clearstream accounts.
  • They will not need to establish a separate custody account in Kenya.
• Clearstream Uses an Omnibus Account Structure
  • Instead of each investor having an individual account at the local level, Clearstream will hold the securities through a single omnibus account on behalf of multiple clients.

Also Read: CBK Explains Why It Has Paused Interest Rate Changes

• Standard Chartered Kenya Acts as a local partner
• • Standard Chartered Kenya will serve as:
    • Cash correspondent bank for transactions in Kenyan Shillings.
    • Local custodian responsible for holding securities with the Central Bank of Kenya.
• Settlement and Safekeeping

• • • • When an investor buys a Kenyan Treasury bond, the transaction will be settled through Clearstream’s platform.
      • The securities will then be safely held through the local custody arrangement, while the investor sees the holdings in their Clearstream account.
• Additional Services
• • Investors will also be able to:
    • Use Kenyan government securities as collateral in financing transactions.
    • Conduct foreign exchange transactions involving the Kenyan Shilling.

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