During a recent webinar co-organized in Paris by the Banque de France and the Foundation for Studies and Research on International Development (FERDI), on the theme: “What role for central banks and banking supervisors in the fight against climate change?”, the Central African Banking Commission (COBAC) and the Central African States Bank (BEAC) revealed their project to transform the B window of the money market into a green window to address the rising climate risks in the six countries (Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea, and Chad) of the Economic and Monetary Community of Central Africa (CEMAC).
According to Yvon Sana Bangui, the Governor of the BEAC, also President of the COBAC, the new initiative aims to “direct central bank liquidity towards financing investment projects with low carbon footprint and resilient to climate shocks”. Furthermore, he argues, “this reform will make the two financial institutions of the CEMAC active partners in resilience and sustainable transition in the region. Our role is to use our monetary and prudential levers to encourage financial actors to become active partners in resilience and sustainable transition in the CEMAC zone.” During his speech, Yvon Sana Bangui declared that “climate risks are now formally recognized as full-fledged financial risks (credit, market, operational, and liquidity risks) within the prudential framework of the sub-region”.
As part of the implementation of this new financing mechanism, the COBAC favors the integration of Climate Stress Tests (CST) in its micro and macro-prudential stress test exercises to assess the resilience of the banking system.
For the BEAC, the future green window will be based on the application of differentiated haircuts to eligible assets as collateral. Ultimately, the aim is to promote bank loans for the most sustainable sectors and those least exposed to climate risks.
As a reminder, the BEAC presents its B window as “a refinancing mechanism for eligible credit institutions to finance productive medium-term investment projects, in order to support the economic activities of the CEMAC countries”.
