The Central Securities Depository or CSD: A critical market institution

William D. Kotei, Accra, Ghana
June 1st, 2024

O n December 24th, 2013, two institutions: the Central Securities Depository Ghana or CSD and the GSE Securities Depository Company Limited or GSD, merged. The single central depository institution that emerged from this merger is now under the supervisor of the Ghana Security Exchange Commission (SEC). The mission of the Ghana Central Securities Depository, or CSD, is to keep securities on behalf of customers and ensure the integrity of records. It also provides clearing and settlement for debt instruments, including Treasury bills, notes, and corporate bonds. It offers similar services for ordinary share, preference shares, and exchange traded fund (ETF). The principal shareholders of the CSD are the Bank of Ghana and the Ghana Stock Exchange.

A securities depository is a critical institution in the financial market infrastructure. Modern central securities depositories offer computerized services and compliance tools. Their automation and digitalization reduce the risk of loss, mutilation, and theft of certificates associated with holding and trading of paper-based securities of investors. Automation speeds up transactions, especially when investors want to use their securities accounts as collateral for loans.

Depository participants

Depository participants or customers are agencies, financial institutions, and corporations which act as intermediaries between the CSD and the public. In 2020, the SEC registered 66 participants which included 16 custodian banks, 22 brokerage firms, and two investment advisory firms. The Social Security and the National Insurance Trust (SSNIT) and the Bank of Ghana also act as depository participants. The major issuers that dominate the portfolio of the CSD are the government of Ghana, the Bank of Ghana, listed companies (incliding commercial banks) and state-owned companies.

Growth

One indicator of business growth for the CSD is the number of registered securities accounts. In 2022, the combined face value of securities in CSD accounts were US$15.3 million (GHC 207,907.9 million).

Growth opportunities exist in the domestic market, especially in private stock ownership. CSD data show that only 88,664 individual in Ghana own stocks, which they have kept under the custody of the CSD. This represents less that 0.01 percent of the population, which was 33.4 million in 2022.

Regional integration

Growth opportunities also exist for Ghana’s at the regional level. West African has three stock exchanges. The largest by geographical coverage, is the Bourse Régionale des Valeurs Immobilières or (BRVM), which groups eight countries. The second is the Nigeria Stock Exchange or (NSE) based in Lagos and finally the Ghana Stock Exchange. But despite their geographical proximity, there is little cooperation between the three institutions and each institution operates in its own domestic closet. This myopic posture is counter-intuitive at a time when stock markets around the world are integrating and pulling their resources together to offer better opportunities, reduce risk and attract investors. The International Monetary Fund (IMF) has made a case for integration, arguing that sharing CSD infrastructure on a cross-border basis delivers efficiencies for CSD technology development and infrastructure¹.

Timid efforts to integrate financial markets and settlement systems in West Africa have yielded disappointing results. Initiatives in this direction have stumbled on issues such as multiple currencies, conflicting regulations, and lack of political will. However, a new impetus towards a cross-border settlement of securities market transactions is coming from the African Free Trade Continental Agreement (AfCFTA). The pan-African single market has developed the Pan African Payment and Settlement System (PAPSS), which has received endorsement from fellow African countries.

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