As a result of achieving 100% dematerialisation the CSDB has been given a rating of BBB with a positive impact by Thomas Murray Data Services. Further, the CSDB has been rated A+ with a positive risk impact with respect to “Asset Safety Risk”.
According to Thomas Murray, the category of “Asset Safety Risk” is defined as ‘the risk that assets held in custody at the CSDB may be lost or misappropriated, either due to a default or an omission, misuse, or breakdown of controls (legal, operational or others)’. In the last assessment by Thomas Murray on 12th May 2016, the dematerialization status was 90.5%.
“The dematerialisation of shares and other securities will eliminate the risks associated with physical certificates such as mutilation, theft and loss, duplication of shares, signature mismatches and transfer problems,” said Thomas Murray.
Chief Executive Officer of the Botswana Stock Exchange (BSE), Thapelo Tsheole said this is an impressive achievement to the group. “The advantages of 100% dematerialisation of shares are that it reduces the risk of fraud and forgery associated with physical share certificates, ensures that information on shareholding is readily available from the CSDB and also allows investors to trade anytime and from anywhere by simply instructing the brokers without the need to deposit certificates in the CSD system,” he said. “Dematerialisation of listed securities has been made compulsory in many markets in which CSDs have been introduced and this is to make clearing and settlement more efficient.”
“The BSE and CSDB will benefit positively from this milestone as it will pave way for CSDB to venture into areas such as provision of custodial services, registry services, information repository as well as Securities Borrowing and Lending. We hope to see the CSDB’s rating improve because we are currently finalising key projects such as the Business Continuity Management (BCM) policy that will have a positive bearing on other assessment criteria within the Thomas Murray risk rating methodology,” said Tsheole.
The positive risk rating of the CSDB and the implementation of the BCM policy will also improve the BSE’s compliance with the principles of the International Organisation of Securities Commission (IOSCO). Compliance with international principles is important to attract foreign investors and promote market confidence in as far as governance and management of systemic risk in our market is concerned.
About Thomas Murray Data Services Thomas Murray Data Services rates over 140 CSDs globally. The key components of rating a CSD are asset commitment, liquidity and counterparty risks, asset safety and financial risks, asset servicing risk, operational risk and governance and transparency risk. The purpose of rating a CSD is to determine the extent to which the depository minimizes risk and maximizes asset safety for participants and investors. The CSD Risk Rating assesses the key procedures required to hold, settle and service securities and includes an analysis of custody, clearing and settlement procedures within a CSD.