Interview: Tiémoko Meyliet Koné
What measures have been put in place to increase the resilience of the banking sector?
TIEMOKO MEYLIET KONE: Recent banking crises have taught us that the resilience of a banking sector depends on the quality of its regulatory framework; the stability of the macroeconomic environment; the efficiency of micro- and macro-prudential monitoring mechanisms; as well as the overall robustness of the country’s financial infrastructure.
Actions taken by the UEMOA authorities are in line with this logic, as shown by the measures implemented – or in the process of being implemented – by the Central Bank of West African States (La Banque Centrale des Etats de l’Afrique de l’Ouest, BCEAO) over the past five years.
The adoption of the Basel II and III framework in June 2016 – set to take effect on January 1, 2018 – will require credit institutions to meet the standard solvency level of 11.5% by 2022, up from 8% today, as well as improve the quality of capital requirements.
They will also improve market discipline, regarding risk exposure, through transparency and better communication. The challenges faced by institutions in this regard will concern the upgrading of their information systems, the alignment of policies and procedures with best practices, as well as the training and development of staff.
The minimum capital of lending institutions has been increased with the aim of strengthening the banking sector in the zone. Moreover, the mechanism to prevent and fight against financial criminality was updated in June 2015, through the adoption of a new law – compliant with the Financial Action Task Force recommendations – against money laundering and the financing of terrorist activities.
The intervention capacities of the Banking Commission of the UEMOA – the supranational authority – for micro-prudential control have been widened, and its supervisory methods are being modernised. A macro-prudential supervision framework is also in the process of being implemented, which will help to foresee systemic risks affecting the entire set of components in the financial sector.
The creation of the Credit Information Bureau (Bureaux d’Information sur le Crédit, BIC) is an important measure for the Union, since it will undoubtedly contribute to the reduction of information asymmetry between borrowers and credit providers, thus improving the business climate and the general supply of credit.
The first one of its kind, Creditinfo-VoLo, created in February 2016 and operating in Côte d’Ivoire, Mali, Niger and Senegal, and is currently being introduced in the countries of Guinea-Bissau, Burkina Faso and Togo. In Benin, the act related to credit activities has been adopted in December, 2016.
How can the standards and processes of financial intermediation be developed?
KONE: With regard to long-term financing, credit providers face several challenges when seeking to finance companies, mainly related to weak governance; the inadaptability of tools; insufficiencies in the legal and judicial environment; difficulties in formalising, registering and carrying out real estate guarantees; the ineligibility of certain guarantees or securities to the current prudential apparatus; as well as the lack of quality information provided by firms – especially when it comes to small and medium-sized enterprises (SMEs).
However, in regard to these problems, the BCEAO is implementing ongoing support mechanisms to finance SMEs, and is promoting new financial products, such as leasing, capital investments, factoring, Islamic finance and so on.
The Central Bank has also taken important steps in reducing the usury rate and creating a longerterm refinancing facility for the country’s banks.
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