London, Thursday 12 December 2024
The overall assessment of ‘A+’ reflects the weighted average of eight individual risk components and indicates a low-risk exposure profile with ‘On Watch’ outlook. This grade maintains CEVALDOM above the average for the Americas CSDs (currently at A) covered by Thomas Murray. Although the overall rating remains stable, improvements in different components have been observed during the last two years. Accordingly, there has been an upgrade to the liquidity risk component (from A- to A) and the counterparty risk component (from A- to A).
The upgrade in these two components follow the introduction by CEVALDOM of fails management arrangements for the on-exchange and over-the-counter (OTC) markets since November 2022. The arrangements appear to be robust for the current market conditions and contribute to reduce participants exposure to liquidity constraints deriving from the late delivery or non-availability of assets, as well as compensating for any losses suffered by the affected party. The arrangements include the use of securities lending and sell-outs, as well as a guarantee fund to support the financial compensation in case of a fail.
The assessment outlook has been put ‘On Watch’ as the fails management arrangements will be reviewed by CEVALDOM and if there are changes, these could impact one or more components of the evaluation. Likewise, the introduction and likely growth of the equity market presents new challenges in the management of corporate events which will require clear processes to reduce risk exposures for the depository and investors during their execution. Additionally, the potential use of omnibus accounts only for international CSDs (ICSDs) and global custodians can create a disparity in the treatment of local and foreign investors. The implementation of this model will be monitored to understand the risks derived from its operation.
It must be noted that the depository continues enhancing the means of communication with its stakeholders and the level of information available to the general public about its services and performance. These steps contribute to increase CEVALDOM’s level of transparency. In addition, the CSD financial position is stronger and the management is working on implementing a recovery and resolution plan that would guarantee the stability of the market under unlikely adverse conditions.
Jim Micklethwaite, Managing Director, Financial Markets for Thomas Murray said:
Freddy Rossi, CEO of CEVALDOM said:
“At CEVALDOM, we work to provide security to the Dominican capital market, supporting its participants in developing strategies that allow the growth of said market and ensuring adequate risk management, as well as transparency and efficiency in our operations. The result of the risk assessment carried out by Thomas Murray confirms that the strategies designed together with our participants and regulators have been appropriate. At the same time, it encourages us to reaffirm our commitment to continue generating value and providing security to the market we serve.”
The CSD risk assessment reviews and assesses the risk exposures for investors associated with the processes the CSD has in place to facilitate the safekeeping and the clearing and settlement of securities, where applicable. It assesses eight key risks (assessment components). The methodology considers the capabilities of the depository and the quality and effectiveness of its operational infrastructure. It also assesses the depository’s willingness and ability to protect its participants or clients from losses. As part of the assessment, the scope and quality of the depository’s services is assessed. The assessments are on a consistent global scale, using the familiar AAA to C grading scale. Once the grading is assigned there is an ongoing surveillance process to monitor the depository.
Thomas Murray maintains proprietary assessments of 159 CSDs globally as part of the Thomas Murray Depository Risk Assessment services.
The full Thomas Murray report is available to interested parties upon request.
Reference information:
CEVALDOM S.A. was founded in 2003 and is the financial market infrastructure that provides essential services to the Dominican stock market. As such, it contributes to maintaining the stability, resilience and transparency of said market, reducing systemic risks and safeguarding the property rights of investors over their securities. CEVALDOM operates in the market as centralised deposit of securities; administrator of a securities clearing and settlement system; and administrator of a securities operations registry system (OTC registration platform). The mission of CEVALDOM is to provide financial market infrastructure services and solutions in the Dominican Republic, complying with the highest security and risk management standards, being an essential strategic partner for its participants. More details: www.cevaldom.com
Thomas Murray is a specialist custody risk assessment, risk management and research firm specialising in the global securities services industry. Thomas Murray was established in 1994. The Company monitors and analyses over 260 custodians globally and evaluates the risk of 159 CSDs, 30 CCPs and over 90 capital market infrastructures. The company has a strong position as a provider of public and private risk assessments on global custodians, domestic custodian banks and capital market infrastructures. More info: https://thomasmurray.com
For further information contact:
German Gutierrez Mejia
Associate Director | Head of Americas, Africa and Middle East Regions