BANKS LIQUIDITY : Beac Opts for the Issuance of Treasury Bills

During the videoconference press conference that punctuated the work of the last CPM of the year 2023, the Governor of the BEAC presented the Treasury Bills to be issued soon by the issuing institute as an offer made by the central bank to over liquid commercial banks, to transfer their excess liquidity to it, against a remuneration determined by the various interest rate offers made by the interested bankers.

Cemac governor, Abbas Mahamat Tolli explains that “We are going to ask the community of banks that have money to put at the central bank to offer us rates, according to the amounts of liquidity that we want to withdraw from the system. Each bank will make its bid, and in the end we will get a rate and cut off the excess liquidity that exists in these banks”. Through these operations to drain bank liquidity, which will take place at a certain frequency, we learn from the press release published at the end of the CPM’s work on December 12, 2023, it is a question for the Beac “to accelerate the resorption of excess bank liquidity in the very short term, and better monitor its evolution”.

In other words, after the successive increases in its main policy rates to toughen the refinancing of commercial banks with the central bank, the increase in the volume of liquidity withdrawn from banks each week (200 billion FCFA), and the suspension of liquidity injection operations in the Cemac banking system, the central bank is now equipped with a new weapon to fight inflation. This is projected by the central bank at 5.6% at the end of 2023. Which, as in 2022, corresponds to almost double the Community threshold of 3 %.

According to BEAC Governor, the Treasury Bill strategy should be more effective in drying up banks, especially those that are absent from the interbank market, while they have excess liquidity. Abbas Mahamat Tolli justifies his optimism by the attractiveness of the level of remuneration of Treasury Bills, which should encourage banks to subscribe to them. In fact, unlike the weekly liquidity withdrawal operations in banks, where the interest rate to which the operation is associated, known in advance, is fixed unilaterally by the central bank ; the remuneration had to be higher when issuing Treasury Bills by the central bank. Insofar as the final interest rate will result from the auctions made by the banks themselves.

According to the Governor of the Beac, this new instrument for piloting monetary policy that will be launched by the issuing institute of Cemac countries is also not in competition with the Equivalent Treasury Bills (BTAS) issued by the States on the public securities market operational since 2011. This, in view of its maturities (14 to 28 days), which are more related to the very short term and are therefore different from the 13 weeks to 52 weeks of the BTA issued by the National Treasures of the Cemac zone.

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