Risk Committee Update: February 2024

Hungary

KELER Group, the only central depository in Hungary, has been stable and profitable for the last few years.

Its previous strategy included the renewal of its old system to align with T2S, which was successfully implemented. KELER’s new strategy involves ‘national excellence’ to ensure it services the domestic market to the best of its abilities.

North Macedonia

North Macedonia has managed to maintain a stable banking system, despite global shocks, and its economy continues to show improvement as it recovers from the European energy crisis.

Heading into 2024, the IMF had positive things to say about the central bank’s “robust monetary framework”, which has kept inflation expectations stable and the foreign exchange market resilient.

In general, North Macedonia’s banks are in good shape – they are liquid, with growing deposits and credit, and record-low non-performing loans (NPLs). Although there have been recent regulatory improvements and a new bank-resolution law is on the way, the IMF urges that the bank deposit insurance law be updated as a priority.

The Risk Committee continues to work through a first-time assessment of the CSD in Macedonia, which will be published in the coming weeks.

South Africa

There was much to say about South Africa when the Risk Committee met on 17 January.

In February 2023, the Financial Action Task Force (FATF) ‘grey listed’ South Africa. In doing so, the global watchdog on financial crime cited a number of South Africa’s Know Your Customer (KYC) and anti-money laundering (AML) failings.

Around 25 of these deficiencies are still to be resolved, though 18 have been dealt with so far. South Africa has made changes to its constitution and laws and, even though a lack of enforcement remains a barrier to progress, South Africa remains confident that it will be off the grey list by 2025. Understandably, foreign investors are not so sure.

South Africa is also battling an ongoing energy crisis, as the nation continues to experience blackouts and brownouts on a regular basis. Ironically, the energy crisis has fostered a culture of operational resilience among FMIs and banks. They have put together a playbook in case they need to work through a blackout during trading.

It’s a busy election year around the world, and the Committee is keeping watch for the date of South Africa’s forthcoming general election. President Ramaphosa must hold one within 90 days of the end of the current parliamentary term, which is in mid-May.

In case you missed it

1. JP Morgan Securities settles with SEC over whistleblower ‘silencing’  - JP Morgan Securities has agreed to pay the US Securities and Exchange Commission US$18m for violating whistleblower protection rules. The SEC says that JPM Securities, “impeded hundreds of advisory clients and brokerage customers from reporting potential securities law violations to the SEC.”

2. 1MDB: Malaysia cites KYC failings as it threatens legal action against foreign banks - The long-running 1Malaysia Development Berhad (1MDB) corruption scandal took another turn at the end of January, with news that Malaysia is pondering legal action against a group of as-yet unnamed foreign banks. Johari Abdul Ghani, who is both 1MDB’s chair and Malaysia’s minister of plantations and commodities, alleges that numerous banks conducted 1MDB-related fund transfers without running proper Know Your Customer (KYC) processes.

3. Boakai feels the heat on inauguration day - Joseph Boakai, Liberia’s new president, had to be helped from the podium mid-way through his inauguration speech in Monrovia on 22 January. Boakai had been sworn into office before feeling faint. A spokesperson for Boakai’s Unity party blamed the extreme heat, though his critics have seized on the incident as evidence that concerns voiced during the election campaign about the 79 year old’s “age and energy” were well-founded.