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SAM MENSAH Ministry of Finance and Economic Planning, Ghana 2006 Annual Conference of the African Stock Exchanges Association Johannesburg, South Africa
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In practice.
Issuers and investors should be free to act across the region and in any member state Intermediaries should be able to act across the region and recognized elsewhere Convergence of accounting standards Integration of clearing and settlement 3 systems
Results in a more efficient financial system and increased output, more jobs and lower prices. A lower cost of capital for the businesses.
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Building infrastructures
Clearing and settlement systems Credit rating agencies
Minimizing risks
Moving towards riskbased supervision Addressing crosssectoral and crossborder issues Safeguarding market integrity
Removing impediments
Capital account liberalization Liberalizing trade in services
Preconditions (e.g. sound economic, legal and judicial, accounting and auditing frameworks
Building infrastructures
enhance the depth and liquidity of capital markets establish links between national clearing and payments systems create regional credit rating agencies and benchmarks.
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Minimizing Risks
Risks of Market integration especially as institutions and individual invest in new markets and instruments.
potential for currency mismatches risks arising from country exposures, risks from institutions that are increasingly active in a variety of financial sectors and geographical regions.
A strong framework for prudential regulation and supervision is necessary to ensure that risks arising from integration are being assessed and managed well.
move towards risk-based supervision, and changes in prudential regulation and supervisory oversight to address crossborder activities.
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Removing Impediments
Legal barriers remain
Removal of capital and exchange controls could increase cross-border flows and competition and enable investors and firms to tap regional markets to find the lowest cost of funding and highest riskadjusted return. Limits on the level of ownership and associated rights In many countries, the existing prudential requirements biases investment toward domestic assets (e.g. restrictions on foreign stock ownership and investments of mutual funds/unit trusts)
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Some are overlapping e.g. SADC/EAC/COMESA Not all RECs have an active capital market integration program
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UEMOA/BRVM FRAMEWORK
Union Economique et Montaire Ouest Africaine (UEMOA) established in 1973 and made up of eight countries (Benin, Burkina Faso, Cote d'Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo). BRVM opened in 1998
Underpinned by UEMOA Treaty signed is 1973 Common central bank BCEAO Common regulator -Regional Council for Public Savings and Financial markets Common Business Law (OHADA) Common Insurance regulator
BVRM has branches in each UEMOA country and its headquarters in Abidjan, Cote D'Ivoire. Although the bourse is majority owned by the private sector, the member states own 13.4% of the capital.
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OHADA (Organisation pour l'Harmonisation en Afrique du Droit des Affaires) Treaty harmonizes business law in 14 countries Full capital account liberalization based on common currency (CFA Franc)
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SADC
Established Committee of SADC Stock Exchanges (1997) Harmonized Listing requirements On the drawing board
Common framework for clearing and settlement Common standards for market dealers
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West Zone
Ghana, Nigeria, Sierra Leone, Gambia and Guinea Two stock exchanges Nor formal regional cooperation except MOU between stock exchanges and SECs of Ghana and Nigeria Heads of state directed a cross listing of securities as part of implementation WAMZ monetary union but no progress has been made
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In Summary
BRVM single market comes closest to integrated regional market because of
Convergence on preconditions (macroeconomic, judicial, auditing and accounting, etc) Common regulatory framework
Single market does not guarantee all benefits of integration (e.g. liquidity) Mixed results in other regional economic communities (SADC, EAC, COMESA, WAMZ)
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Principle of home country supervision Single passport allows financial institutions to do business across EU armed only with the approval of their home authorities
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THANK YOU!
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