The story has taken a different twist from the article at least with the mentioning of BOA. Starting to turn into a witch-hunt.

[quote=Scubidu]The capital markets regulator on Monday demanded that the role of creating and primary issuance of bonds be transferred from the CBK to the Treasury in the wake of the scam involving the sale of fake government securities.

Capital Markets Authority (CMA) chairman Kung’u Gatabaki said such a move would also remove the risk of conflict of interest that the CBK currently faces being in charge of the country’s monetary policy while at the same time raising funds on behalf of the Treasury that has a preference for lower interest rates on its debt.

“The CBK should not have an interest in the outcome of the bond auctions,” Mr Gatabaki said, adding that the Treasury was better suited to handle the bonds and keep custody of government securities through its Debt Department.

“The Treasury should take charge of the whole process of creating and issuing government securities.”

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http://www.businessdaily...0/-/its3uv/-/index.html[/quote]


where in the world does this happen?

isnt this a conflict of interest?

My thoughts exactly.
Wont we have sent the money to more hungrier mandarins who may exploit the loop holes more?
Not unless the national treasury pays the civil servants in the debt dept staff better rates.

@kizee1. No idea where this happens. Conflict? They issue, they allocate, they spend, I think so, sounds like no controls. I don't think Treasury would be any more accountable than CBK when it comes to scandals so they'd be just as bad. Even worse maybe as they'd be the custodians of bonds and payers of coupons (who wud notice a fraud). The stories indicate that criminals took advantage of a switch in systems to steal, which Treasury would have to do if they were to assume control anyway. Or this could be a case of 'it's my turn to eat' with Treasury looking to get in on the action that a select few at cBK have enjoyed (in secret). Perhaps it's the Treasury secretary who is simply missing the control he had at CBK.

The obvious benefit for Treasury is that they don't need to pay CBK 3 bn annually for their services and can decide what to issue. But whether they'll be more effective at giving rate direction or coordinating with the market is a different question. I think the guys endorsing this assumed CBK is struggling with both fiscal and monetary responsibilities and so must stick to one. But I find this hard to swallow as Treasury is already faced with a thousand and 1 pressures not to capitulate to guys like governors and investors meaning that it's unlikely they'd ever have a harmonized policy with CBK (on the monetary side) should they take control.

My 2 cents

@Kizee 1 your question was “where does this happen?”
In the UK it does, The Debt management office is an executive arm of HM Treasury ,Its key roles include;
(i) Making new issues of UK govt securities ( gilts).
(ii) Overseeing the secondary market for dealing in gilts with help from the LSE.
The DMO ensures that the government borrows the money it requires to fund its Public Sector Net Cash Requirement (PSNCR).
In the US the Federal Reserve is the depositary of most but not all govt bonds…
Now to our local scenario I believe the CBK has always played its role perfectly until this saga occurred and it only happened because there was a loophole in their system that enabled cunning individuals to manipulate it,remember after the primary the bond issue is scattered amongst different investors and unless reconciliation is done daily so that the issuer gets to know what investor A holds and whats the total figure out there of the original issue there is a problem.
I have a question though in regards to this fraud,lets say 10 Billion is issued via a primary,lets call our bond FXD 1/2013…immediately the primary is completed and various investors have received what they had tendered for you cannot add another 100m on the original primary unless it’s a re-opening …so how did this guys go about it? Coupon payments, secondary trading how was this possible for a long while without red flags being raised….