The Central Securities Clearing System (CSCS) Plc has been upgraded from A- to A, which indicates ‘Low Overall Risk’ by Thomas Murray Data Services, the United Kingdom specialist custody rating, risk management and research firm.
The overall rating of ‘A’ reflects a weighted average of seven risk components. The outlook of CSCS rating is ‘Positive’ owing to developments taking place in the course of 2016-17, with a positive impact on counterparty risk, asset safety risk, operational risk and financial risk.
Commenting on the rating, , Managing Director and Chief Executive Officer of CSCS Plc, Mr. Kyari Bukar said: “The upgrade from A- to A is a significant milestone towards being a globally respected and leading central securities depository in Africa. The key upgraded areas further indicate that we made notable improvements in managing our market’s overall risks to low level in line with best practices. I am glad that the efforts made in this regard over the years is of significant impact due to the collective effort of all our committed staff.”
Chief Risk and Ratings Officer of Thomas Murray Data Services, Nick Bradley, said: “The overall rating upgrade acknowledges actions taken by CSCS over the past few years to mitigate risks. This is the result of CSCS’s continuous efforts toward adopting international best practices.”
The three risk components upgraded are: Asset Commitment Risk from A to AA-, based on the shifting of settlement value ratio in favour of OTC bond transactions which overall have a shorter asset commitment period than on-exchange transactions; Operational Risk from A- to A, reflecting improvements in internal controls, operational procedures and business continuity planning and disaster recovery procedures; and Governance and Transparency (G&T) Risk from A- to A, on account of better disclosure of corporate and statistical information on CSCS’s website, and improved performance management standards and user group arrangements.
Other major developments which have contributed to reducing settlement risks in the market include the new SEC minimum capital requirement for brokers/dealers (N300 million) and the shifting of cash settlement for on exchange transactions from the afternoon to the morning of settlement date (SD).