- May 6, 2021
- Posted by: admin
- Category: Current News
Regulatory authorities and standard setters have made recommendations in the aftermath of the Global Financial Crisis (2007/8), to address some of the challenges that led to the crisis. One of these challenges was the over-reliance on credit ratings issued by Credit Rating Agencies. As a remedial measure, in July 2008, the Bank for International Settlements (BIS) Committee on the Global Financial System (CGFS) advised that credit rating information should support, not replace, the investor due diligence process. Similarly, a study commissioned by the Southern African Development Community (SADC) on trends in sovereign reserves management recommended that central bank reserves managers should put in place credit risk analysis systems to support their reliance on major rating agencies. This recommendation is in line with guidelines on Sovereign reserves management issued by the International Monetary Fund which encourage member countries to supplement the work of Credit Ratings Agencies.
In line with these recommendations and as part of its commitment to support member countries improve financial sector management practices, MEFMI developed the Internal Credit Risk Analysis Tool (ICRAT). The tool uses market-based information to extract implied ratings and the Bloomberg data to populate the dataset. In the wake of the COVID-19 pandemic and the implications for financial markets, tools that strengthen oversight of sovereign reserves managers such as ICRAT are perceived to be very important. The tool has been widely accepted by MEFMI member countries. Banco de Mocambique became the ninth MEFMI member country to implement ICRAT. The implementation of ICRAT at Banco de Mozambique was done remotely from 12 to 23 April 2021 using video conferencing technology.
The mission was attended by 13 participants from the Bank, three (3) of whom were female. The participants were trained on the theoretical background and mathematical basis of the ICRAT model. The participants were also taken through the practical use of the ICRAT to carry out data analysis and interpret results more effectively. It is anticipated that participants will use the knowledge and the ICRAT to strengthen the Bank’s investment risk analysis process.
The mission was facilitated by the ICRAT Technical Working Group team comprising Professor Phillip Mashele, Ms. Chakudza Banda, Ms. Mamotlohi Mochebelele, Mr Lameck Kakulu, Ms. Sesilia Nambambi and Mr. Alphonse Ndikubwimana. Mr. Noel Mahombera and Mr. Patrick Mutimba from the MEFMI Secretariat supported the team.
MEFMI is committed to continue supporting member countries that indicate interest in adopting the ICRAT and obtain feedback from users to improve the value proposition attributed to the tool.