linah k mohohlo : liquidity conditions in botswana banks speech by ms linah k mohohlo, governor of the bank of botswana, at the press briefing on banks ’ liquidity condition, gaborone, 26 march 2015. * * * i welcome you to this press briefing, the purpose of which is to provide clarity on liquidity at commercial banks. this is in response to some recent articles in the local media which suggest that, among others, banks in botswana are in financial difficulties and their customers face a “ credit crunch ”. the bank of botswana welcomes informed reporting of topical banking / financial issues and, in this spirit, has endeavoured to provide timely and informative responses to questionnaires received on the matter. as you will be aware, i took advantage of the national business conference in maun in november last year and addressed the issue of commercial bank liquidity in some detail. given continued interest on the subject, we have considered that a further engagement with the media is advisable. i will share with you salient points on this important matter and respond to questions thereafter. i would like to underscore an important fact, and that is, the banking sector in botswana is sound and profitable. profitability has of course declined as expenses increased faster than income, and the situation varies from bank to bank. in the 12 months period to january 2015, the aggregate industry balance sheet grew healthily by 11 percent, with deposits growing by 7 percent and credit growing by 13 percent. a tightening of bank liquidity has been evident. what is key is that all banks continue to comply with the necessary requirements such as the statutory liquid asset requirements. recent economic and market developments have had no adverse impact on levels of capital in the banking industry, with the aggregate capital adequacy ratio at 19 percent as at january 2015, and above the prudential limit of 15 percent. in the past five years, excess liquidity in the banking system, as represented by outstanding bank of botswana certificates ( bobcs ), has declined from p17. 7 billion as at end - 2010 to p4. 6 billion in february 2015. the main cause was the bank of botswana ’ s phased reduction of the excess money that is continuously mopped by way of auctioning of bobcs. the cap for this excess money is currently p5 billion and it was put in place to encourage productive lending by banks as well as to moderate the cost of mopping up

stocks. we, at the banque de france, adopted in march last year a charter on responsible investment for the management of our own funds and our pension portfolios : this means allocating them to socially and environmentally responsible investment funds. with respect to disclosure, in march 2019 we were the first central bank to publish our climate - related risks ’ exposures. we are also working to further align our reporting with a tcfd - like approach that would fit the specificities of central banks. we trust our experience will be useful to the ngfs membership in defining some best practices as far esg investment for central banks is concerned. we can be proud of what we have achieved in 16 months, but it is “ time to roll up our sleeves ” : the merciless perspective of a more than 2°c world requires us to strive to do better and to do it now. developing practical solutions now tops the agenda of the ngfs “ season 2 ”. ii. the road ahead for central banks / supervisors and other players too a. disclosures and taxonomies, two faces of the same coin we are currently facing a chicken and egg dilemma. in order to bridge the data gaps, we must rely on enhanced disclosures that need to be built on sound taxonomies. but we need some data to set out a proper taxonomy! it is time to follow the path set by the tcfd on one side and the european commission on the other to address all issues at the same time. it means working jointly on disclosures and taxonomies. it will notably help to enhance the quality of disclosure and, ultimately, its relevance in internalising the current climate change externality for all firms. we will then be in a position to move gradually towards compulsory transparency based on a “ comply or explain ” principle, such as that of article 173 of the french energy transition law that could usefully serve as a reference. b. integrating climate - related risks into financial stability monitoring substantial work remains to be done to achieve “ the video of risks ”. our feeling is that risk premia do not currently appropriately reflect climate risks. and therefore i believe that we, as central banks and supervisors, must push for a forward looking vision of the impacts of climate risks. in order to properly size the financial effects of climate change, our goal is clear : we should be able to design some comprehensive climate stress tests. what does it mean in practice? the snapshot of risks provides information on