ICRAT Implemented in Tanzania

In the Phase IV Mid-Term Review (MTR) of MEFMI, member countries highlighted a need to strengthen risk management in reserves, mainly due to several developments:

i. The push for central banks to reduce the heavy reliance placed on credit rating agencies and better assess credit risk in their portfolios;
ii. Growing central bank reserves requiring better management and oversight;
iii. Low to negative interest in the investment universe which put pressure on reserves managers to explore ways of maintaining stronger returns. This would be expected to include a review of asset classes, currencies and markets.

A study commissioned for SADC on trends in sovereign reserves management recommended that central banks reserves managers should put in place credit risk analysis systems to support their reliance on major rating agencies. Therefore, MEFMI commenced a study in 2015 to develop a tool for Central Banks for the analysis of credit risk internally. In this development process, the tool was further subjected to reviews, culminating in a launch in 2017 at the Retreat for Heads of Reserves Management and Investment Committee members. Subsequent to that, the ICRAT was linked to data from Bloomberg and implementation commenced.
The tool has been implemented at Bank of Namibia (BON) and National Bank of Rwanda during 2018. During 2019 two prior implementation have been at the Central Bank of Lesotho (CBL) in March 2019 and Malawi in July 2019. Tanzania implementation in September brings to five (5) the countries that have implemented the tool.