Citibank is making headway in the creation of Kenya’s first global depository notes issue, the Capital Markets Authority has said.
In May, Citibank East Africa chief executive Joyce-Ann Wainaina said the lender had partnered with the regulator for the roll-out of the new product.
The global depository notes and receipts are negotiable certificates issued on bonds and shares listed and traded on a securities exchange representing securities issued in another country. The new products are aimed at eliminating currency risk for investors both domestic and international.
According to CMA, as at mid October, Citibank had held a joint meeting with the regulator, Central Bank of Kenya and the National Treasury to work out the remaining areas.
“Citibank has been seeking a heads-up from the CBK, that the transfer of the Treasury Bonds from CBK’s central depository following its purchase for purposes of creation of the GDN that will be a ‘delivery free of payment’ which will not attract any transaction costs,” CMA regulatory policy and strategy director, Luke Ombara, told the Star. ‘Delivery free of payment’ means that the global depository notes offered by the lender will not be linked to a corresponding transfer of funds meaning only the securities are moved.
He said that once the CBK nod was given alongside other logistics such as the mode of transfer of the securities, the GDN would be ready for roll-out.
“GDN and GDRs are still important products to address foreign investors’ exposure to local currency conversion risks faced when they directly participate in our market,” Ombara said. “They therefore create an opportunity for investors to invest directly.” He added that jurisdictions such as US and Europe, where there are regulatory limitations on direct investment in securities outside their borders, would also benefit from GDRs and GDNs investment as an alternative.
In July, CMA approved rules for listing and trading of global depository notes and receipts as part of the authority’s 10-year capital markets master plan, geared towards diversification of Kenya’s capital markets. So far, only Citibank has engaged in the roll-out of the new product.
“Right now, it’s only Citibank who are taking up the investment product but we expect more with time,” Ombara said.