MEFMI deploys ICRAT at Bank of Uganda

MEFMI developed the Internal Credit Risk Analysis Tool (ICRAT) as part of ongoing initiatives to support managers of foreign exchange reserves in central banks to strengthen internal credit risk assessment practices. The tool uses market-based indicators to generate credit alerts on specific issuers, which central banks can use to monitor and manage credit risk arising from reserves management operations.

In 2019, MEFMI deployed the tool at the Bank of Uganda. However, staff turnover affected its utilisation, after key staff trained during the implementation moved to other departments as part of the Bank’s staff rotation policy. As part of its efforts to strengthen the internal credit risk assessment process, the Bank of Uganda requested for a mission to redeploy ICRAT as well as train key staff on how to use the tool. In response, a MEFMI mission implemented the tool at the Bank during the period 11 to 15 July 2022.

The objective of the mission was to strengthen the Bank of Uganda’s systems for assessing and monitoring counterparty credit risk and train the Bank’s officials to use ICRAT. At the end of the mission, Bank of Uganda had a clean functional Dataset, a critical part of the tool; and key staff were now able to use ICRAT. The process of updating the Dataset, validating the updated data and running the tool was driven by the Bank staff, guided by the MEFMI team. Participants were also able to read and interpret the credit alerts generated by the Tool for specific issuers and are expected to use these signals to strengthen credit risk management in foreign exchange reserves operations.

The course was facilitated by a team of six (6) resource persons, who are part of the ICRAT Technical Working Group, namely Professor Hopolang Philip Mashele (Independent Consultant), Ms. Chakudza Banda (Reserve Bank of Malawi), Ms. Glory Maembe (Bank of Tanzania), Mr. Majara Rantoa (Central Bank of Lesotho), Mr. Alphonse Ndikubwimana (National Bank of Rwanda), and Ms. Sesilia Nambambi (Bank of Namibia). The overall administration of the course was done by Mr. Tiviniton Makuve, Mr. Patrick Mutimba and Mrs. Charity Mangwende of the MEFMI Secretariat.

Going forward, MEFMI will continue to enhance the functionalities of the Tool to respond to emerging requirements of client central banks.

Prepared by Tiviniton Makuve