URBRA and Frontclear join to deepen secondary bond markets

Cardano Development group company Frontclear signed a Memorandum of Understanding (MOU) with The Uganda Retirement Benefits Regulatory Authority (URBRA) to support Retirement Benefits Schemes’ participation in money and secondary bond markets. This MOU complements that signed between the Bank of Uganda (BOU) and Frontclear in 2019 and the pivotal role Retirement Benefits Schemes play in government securities markets.

The MOU has a clearly defined work programme. A key objective will be to inform the review and reform of primary and secondary legislation towards creating a more conducive legal environment allowing for Global Master Securities Lending Agreement (GMSLA) enforceability. In addition, the project will develop market principles and operational guidelines to ensure prudential participation by Retirement Benefits Schemes and establish standards of best practice to manage any risks that may arise from such transactions. Lastly, it is complemented by legal and operational training towards effective operationalization of transactions.

The URBRA carries strong ownership for the project and recognises the importance of Retirement Benefits Schemes’ participation in securities markets. Retirement Benefits Schemes hold the lion’s share of government securities, which when ‘freed-up’ in the secondary market would greatly improve overall capital market efficiency and liquidity.

“Over 70% of the retirement benefits schemes assets under management are invested in government securities, with majority held to maturity which aligns to the long-term objective and nature of retirement benefits schemes. Beyond adequate returns, diversification of investments and security of benefits, retirement benefits schemes seek greater transparency, efficiency and integrity in both the primary and secondary markets. URBRA not only aims at
promoting the development of capital markets through RBS participation in the secondary markets but also at conducting regular assessments and reviews of investment activities in tandem to market standards of best practice.” Said CEO Martin Nsubuga, URBRA

“Across many Sub-Saharan African markets, pension funds often hold to maturity and can carry up to 70%/80% of a market’s public issuances. Responsibly removing the obstacles to pension fund participation in secondary bond markets, especially repo markets, benefits the financial system as a whole.” Said CEO Philip Buyskes, Frontclear