A cross-border continental banking supervision plan pushed by the Central Bank of Nigeria (CBN) is on the cards as the aggressive expansion by large African banks blurs regulatory lines and presents unique market risks.
Lamido Sanusi, the CBN governor, earlier last week spelled out his intent to push for a continental banking supervision body during the International Monetary Fund’s (IMF) annual meeting in Turkey next month.
If pen is put to paper, such a continental regulatory framework to check regional and commercial banks’ operations could reduce credit and market risks should a lending institution fail in their home country.
“I am concerned that we have got banks that are spreading across different African counties and while we sign MoUs with other regulators, we don’t have an African framework for cross-border supervision,”Sanusi is quoted as saying.
Nigerian banks have branches spread across Africa and that poses credit and market risks as well as risks to the reputation of the country’s banking industry as a whole.
“I think the Nigerians, the South Africans, the Ghanaians, the BCEAO (West African central bank), the Central African regulators can together build a framework that makes sure all banks that operate anywhere in Africa are closely regulated,” he added.
“The proposal is feasible. Banks all over the world work in the same way and have similar accounting standards.
The only different thing is the jurisdictions within which they operate and politics,” says Ochieng’ Oloo, chief executive officer at Think Business, a firm specializing in research in Kenya’s financial services sector.
Most countries in Africa require commercial banks operating in their countries to publish financial statements in accordance with the International Financial Reporting Standards (IFRS), a similar regulatory framework can the thrashed out.
According to advisory services firm PriceWaterhouseCoopers (PWC), all African countries, apart from Uganda, Zambia and Mozambique, have moved to IFRS.