njuguna ndung ’ u : kenya ’ s financial markets and payment systems developments remarks by professor njuguna ndung ’ u, governor of the central bank of kenya, at the launch of the funds settlement system for equities and corporate bonds through kepss, nairobi, 27 january 2015. * * * ms. rose mambo, chief executive, central depository & settlement corporation ; mr. paul muthaura, ag. chief executive, capital markets authority ; mr. andrew wachira, acting chief executive, nairobi securities exchange ; chief executives of the central depository agents ; chief executive, kenya bankers association ; ceos of commercial banks here present ; chief executive, kenya association of stockbrokers & investment banks ; distinguished participants ; ladies and gentlemen : i am pleased to join you today on this auspicious occasion to launch the settlement system for equities and corporate bonds through the real time gross settlement platform of the central bank of kenya, commonly referred to as kepss. at the outset, i congratulate the technical teams from the cdsc, cma and cbk that ensured the success of this process. ladies and gentlemen : we are gathered here today to celebrate another milestone in the development of kenya ’ s financial markets and the developments in the payment systems. as you are all aware, the financial landscape has changed considerably in kenya and the countries in the region. for the region to attract foreign investors and deepen its markets, there is need to enhance our financial markets systems and processes to meet international standards. in this regard, i wish to recognize the east african community ( eac ) financial sector development regionalization project ( fsdrp ), for spearheading an assessment of eac partner states ’ compliance to the international organization of securities commissions ( iosco ) objectives and principles of securities regulation, particularly principle 38 on clearing and settlement. the project assessed the levels of development of the securities markets payments and settlement system as well as existing capacity to comply with principle 38, and developed action plans for compliance with the principle of delivery versus payment ( dvp ) that formed the basis for the current developments. ladies and gentlemen : kenya ’ s development blueprint, vision 2030, envisages a financial sector that is vibrant and globally competitive in driving high levels of savings and financing the country ’ s investment needs. to achieve this goal, the clearing and settlement systems should be subject to regulatory and supervisory requirements that are designed to ensure that

had a calming effect on financial markets. the composite indicator of systemic stress ( ciss ) used by the ecb indicates that this policy response has averted a severe financial market crisis in the spring of 2020 ( figure 9 ). figure 9 indicator for systemic stress in financial markets ( ciss ). index https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201216 _ 1 ~ 9caf7588cd. en. html 10 / 17 12 / 18 / 2020 the importance of trust for the ecb ’ s monetary policy source : ecb working paper no 1426. notes : ciss denotes the composite indicator of systemic stress ( 0 = no stress, 1 = high stress ). the indicator aggregates stress signals from money, bond, equity and foreign exchange markets. the latest observation is for 11 december 2020. the ecb ’ s crisis measures consist mainly of a new temporary asset purchase programme, tailored specifically to the pandemic crisis – the pandemic emergency purchase programme ( pepp ). in addition, the ecb provides ample liquidity to banks at highly favourable conditions, thus ensuring that they continue to lend to businesses and households in the euro area. the ecb ’ s crisis measures thus ensure the smooth transmission of our monetary policy measures to the entire euro area. the economic consequences of the pandemic have especially affected those countries that already had relatively high debt levels prior to the crisis and where confidence in the ecb was rather low. [ 21 ] at the beginning of the pandemic period, there was thus a concern that limited fiscal space in some euro area countries would significantly constrain the fiscal response to the crisis. these fears increased the risk of fragmentation in euro area financing conditions, which was immediately reflected in the evolution of risk premia in european bond markets. the ecb effectively countered this risk, in particular by swiftly implementing the pepp ( figure 10 ). figure 10 10 - year yield spreads of selected government bonds over german equivalents. basis points https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201216 _ 1 ~ 9caf7588cd. en. html 11 / 17 12 / 18 / 2020 the importance of trust for the ecb ’ s monetary policy source : bloomberg. note : the latest observation is for 14 december 2020. complement