BCEAO (Central Bank of West African States)

The BCEAO (Central Bank of West African States) is the common central bank of the eight WAEMU (West African Economic and Monetary Union) states, based in Dakar, which issues the West African CFA franc (XOF) and holds the union's foreign exchange reserves. On January 9, 2022, in Accra, the WAEMU heads of state decided to freeze the Malian state's assets at the BCEAO: by late January, the Treasury in Bamako could no longer service its securities on the regional market. The episode shows what the institution is. The Central Bank of West African States, headquartered in Dakar, is the common issuing bank of the eight members of the West African Economic and Monetary Union: Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. It issues the West African CFA franc (code XOF), runs a single monetary policy and pools the member states' foreign exchange reserves, which means no national finance minister controls his country's hard currency alone. It also keeps the Treasuries' accounts and, through the UMOA-Titres agency set up under its aegis in 2013, organizes the union's government securities market. For a political risk underwriter, the BCEAO changes how transfer risk reads. A foreign currency shortage in Niger or Mali is settled at union level, backed by the French Treasury's convertibility guarantee (see CFA franc). Pure inconvertibility risk is therefore lower there than elsewhere on the continent. The flip side, as the Malian case showed, is that a political decision taken at regional level can cut a state off from its own central bank overnight. In 2022, the currency kept its parity and convertibility; what broke was the state's access to its accounts, and CPRI (credit and political risk insurance) policies have to be able to characterize that risk. The usual practitioner caveat: a sound monetary union protects neither against the default of a member Treasury nor against a state leaving the union.