The Global Finance in New York, last week named the best banks in Africa 2017 where, Standard Bank South Africa, was the regional winner. Global Finance’s annual Best Bank Awards celebrate financial institutions that excel at delivering customers the services and products tailored to meet their unique needs. I was extremely glad to CBZ being named as part of top 30 banks in Africa.
BY KUDZAI GOREMUSANDU
The pan-African banks (PABs) are playing a key role in driving financial innovation and development in Africa. Reflecting a number of converging push and pull factors, aided by improved political and macro-economic stability and robust economic growth, the face of African finance is changing rapidly. The PABs are driving financial integration and inclusion, and spurring innovation and competition. The ending of several civil conflicts in Africa, recovering growth and macro stability, and the opportunities from large unbanked populations across Africa is fertile ground for the expansion. In Nigeria, the large increase in minimum capital requirements, following a banking crisis in the mid-2000s, pushed banks to consider expanding abroad to make use of their new capital bases. Moroccan banks also saw opportunity to extend their networks south in the face of a more saturated banking market at home.
A renewed impetus for regional integration in the East African Community, coupled with the success of mobile payments in Kenya, was propitious to the expansion of Kenyan banks in East Africa. Standard Bank and Ecobank dominate the large cross-border banking groups in terms of size and number of systemically important subsidiaries, although with very different structures. Standard Bank is the largest Pan African Bank group in size, measured by consolidated assets, with a traditionally dominant home base.
Sources: 2016 Annual reports; Bankscope; and IMF staff calculations
Countries in Sub Saharan Africa are at different development levels with regards to their financial sector regulation and supervision standards and operate at varying stages of implementation of international standards. Whereas a number of countries have moved to International Financial Reporting Standards, implementation of Basel II standards has only been completed in a handful of countries. An important part of depositor protection, namely depositor insurance, is missing in the majority of countries. Sadc countries have started to collaborate in core elements of the financial infrastructure and efforts are underway to enhance co-operation and co-ordination of regulatory and supervisory policies. In particular, the Protocol on Finance and Investment encourages Sadc countries to develop harmonised standards of practice and regulations
How to develop sound and effective Pan Africa banks
Governance and ownership structure: In Africa and worldwide, bank problems have often been associated with governance issues concerning the bank’s leadership. This requires a thorough supervisory oversight in particular for PABs with complicated structures ensuring that the ultimate beneficiaries are known. Supervisors should review their fit-and-proper oversight of bank management and take urgent action if deficiencies in fitness and propriety are uncovered. They should also look closely at cross-border intra-bank transactions. Close collaboration among the supervisors is likely to be critical. If the home supervisor sees that a complicated structure hampers effective supervision of the banking group, the supervisor should request a more transparent structure and follow up on its implementation. Similarly, host supervisors have a responsibility in reviewing the structures affecting subsidiaries in their jurisdictions and using their corrective, enforcement powers during licensing and thereafter.
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Data and transparency: Data availability in many countries at present are limited, and exchange of data may be constrained by national secrecy laws. In particular, information on cross-border exposures within a PAB is limited, making it hard for the supervisors, and indeed the bank itself, to get a firm understanding of cross-country exposures. National authorities need to identify data requirements and ensure adequate and timely exchange, both upstream and downstream. If adequate provision of appropriate data cannot be ensured at the licensing stage or reporting is obstructed, subsequently home supervisors should take appropriate corrective actions. Also, appropriate sharing of information between supervisors and authorities responsible for macro prudential and financial stability aspects and the central bank at the national level is vital.
Consolidated supervision: Implementation of consolidated supervision for all PABs, in particular for the major PABs, needs to be a high priority, and plans for implementing it need to be accelerated. Consolidated supervision by the home authorities should also cover the provision of centralised group services and ensure that these are not used for circumvention of restrictions, for example on capital transfer or dividends.
Harmonisation: Cross-border activities bring into focus differences across countries in regulatory and supervisory practices. Lagging countries should intensify their efforts to harmonise their prudential regimes with international standards and prioritise legal reforms enabling effective supervision and crisis management. A phased introduction of Basel II/III standards in lagging countries would be welcome, and should be part of a more comprehensive reform to strengthen their regulatory and supervisory frameworks.
Adoption of International Financial Reporting Standards accounting standards should be accelerated.
Competition and consumer protection
Code-of-conduct issues should be on the authorities’ agenda. As with prudential issues, it would also be useful to collaborate across borders. These issues can have important implications for financial stability and consultation at national level between supervisors and authorities responsible for financial stability and the central bank is important. For example Bank Al-Maghrib , the central bank of Morocco has established a committee in which the three Moroccan PABs discuss best practices for the African expansion.
Kudzai Goremusandu is a strategic, innovative, dynamic, goal getter, enterprising banker and financial consultant. Kudzai holds an award for Effective Media Communication from the University of Zimbabwe. Kudzai is based in Harare, Zimbabwe. He can be contacted@[email protected]
