This summary describes equity investments by Absa Group Limited (Absa Group) in its subsidiary in Kenya, Barclays Bank of Kenya Limited (subsidiary). The investor has applied for MIGA guarantees of up to US$110 million in mandatory reserves cover for a period of up to 15 years.
The aim of MIGA’s proposed guarantees is to help Absa Group reduce the risk of some of its assets, which would lead to a reduction in the group’s RWA on a consolidated basis. Absa Group plans to deploy this headroom of consolidated RWA across its Africa operations, including Kenya, thus increasing the potential reach, development impact, and financial returns of the foreign investment. MIGA’s proposed coverage to Absa Group is aligned with the most recent World Bank Group’s strategy for Kenya, as it seeks to promote private-sector-led growth via increased access to finance in the country and to promote sustainable investments.
Absa Group, South Africa-based, is one of the largest pan-African financial institutions in terms of total assets with operations in ten countries in Sub Saharan Africa. Its subsidiary banks outside of South Africa are required to maintain reserves at the central banks in their respective jurisdictions, based on the volume of customer deposits that these subsidiaries have. Mandatory reserves contribute to Absa Group's overall risk-weighted assets (RWA) at the consolidated level, resulting in less headroom for other assets at a given level of capital.
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