The Central Bank of Eswatini, through the Financial Markets Department, engages in a variety of operations covering money markets, bond markets, and foreign exchange markets. This is in support of the core objectives relating to monetary and financial stability, and the implementation of the Bank’s monetary policy decisions. In line with the Central Bank of Eswatini’s mandate as outlined in the CBE Order (1974 as amended), the key responsibilities of the Financial Markets Department are as follows:
- To prudently manage the foreign exchange reserves of Eswatini to ensure they are safe, readily available to meet obligations (liquid) and earn market related returns.
- To act as agent and adviser for the Government of the Kingdom of Eswatini in debt origination. The Bank functions as an agent of Government in the issuance, service and redemption of Government securities and Treasury Bills.
- To provide Treasury management services to Government (manage foreign currency inflows, outflows, and all external payments).
- Manage liquidity in the domestic market and facilitate implementation of monetary policy by providing cross-border liquidity for domestic banks.
- Together with other market players, facilitate the development of domestic financial markets.
The Financial Markets department is divided into four sections namely; Investments, Risk and Compliance, Treasury Operations, and Domestic Markets. The main areas of responsibility of each section are outlined below.
Front Office (Investments)
The Investments team is responsible for strategy and dealing in execution of the reserves management function of the Bank. The unit’s activities include the following:
- Devise and implement annual investment strategy for the reserves portfolios and continuous review of such strategy in line with market movements.
- Analyse and interpret economic and financial data, news and geopolitical developments to identify appropriate investment opportunities and execute trading activities to implement investment strategy and/or necessary review thereof.
- Deploy the reserves by trading in fixed income, money market, and foreign exchange markets and products, in line with the outlined objectives of safety, liquidity and return and in compliance with the Investment Policy and Guidelines.
- Conduct operations in spot, forward, swaps and options markets in the local market to grow the portfolio of foreign exchange reserves.
- Report to Management and Executive in respect of financial market conditions, investment activities and performance of the portfolio.
Risk and Compliance
The Risk and Compliance division is responsible for Risk Management & Analysis, Compliance Monitoring and Counterparty relationship management. Its functions include but not limited to:
Compliance Monitoring and Counterparty relationship Management
- Risk Management and Analysis
- Liquidity risk, credit, and counterparty credit risk management to ensure the safety and preservation of foreign reserves.
- Portfolio risk management and performance measurement to ensure prudent portfolio management.
- Operational risk and evaluation of operational risk management controls to ensure an effective mitigation of threats emanating from all operational activities.
- Risk modelling, development and implementation of quantitative models and tools for strategic and tactical asset allocation.
- Ensure compliance and adherence to Investment Policy and Guidelines in all foreign reserves management activities.
- Conduct counterparty due-diligence, screening and on-boarding to ensure that counterparties and potential counterparties meet all the Investment Policy and Guidelines requirements.
- Maintain collaborative and constructive relationships with all counterparties and stakeholders including external fund managers.
- Responsible for putting systems in place for managing AML/CFT in the Financial Markets department. This is to ensure that the Bank is compliant with the measures fighting against Anti-Money Laundering and Terrorist Financing.
The Treasury Operations unit is responsible for the settlement, accounting and reconciliation of transactions emanating from both foreign reserves management and domestic debt management activities. It also provides international banking services to the Eswatini Government and other designated entities. The functions of the unit include:
- Establishment and maintenance of relationships with customers, correspondent banks, counterparties and custodians.
- Confirmation and settlement of trades emanating from Reserves Management and Debt Origination activities.
- Accounting for financial instruments trades in accordance with adopted accounting standards.
- Reconciliation of foreign account balances to internal records (General Ledger).
- Provision of international banking services to the Eswatini Government, CBE and other designated customers.
- Modernization of business processes and payment systems to enhance efficiency.
- Continuous screening of all transactions to ensure compliance to regulatory standards.
The Central Bank of Eswatini plays a key role in the domestic financial markets. Various money market instruments are used to influence the level of liquidity in the economy, and the Bank acts as a lender of last resort to commercial banks on a daily basis. These functions act in support of the implementation of the Bank’s monetary policy decisions. The Domestic Markets unit is responsible for:
Monetary Policy Implementation
Through the Financial Markets Department, Domestic Markets unit, open market operations are conducted to manage the level of liquidity in the local market and thus effectively implement monetary policy decisions. The activities involved include:
- Debt Origination The Bank functions as an agent of Government in the issuance, service and redemption of Government Bonds and Treasury Bills. The Domestic Markets Unit carries out these agency and advisory functions to the Government of Eswatini on debt origination by:
- Assisting Government in raising debt in local and international markets, designing issuance strategies, and managing the debt portfolio.
- Advising Government on alternative sources of funding both in the local and international markets.
- Maintaining a Central Security Depository (CSD) for Government securities and performs custodial services
- Collaborating with key stakeholders to develop and deepen local money markets and capital markets.
- Forecasting liquidity in the domestic markets.
- Conducting open market operations to either inject or drain liquidity, based on the results of the liquidity analysis.
- Designing strategies to mitigate capital outflows in order to protect the level of reserves.