## Cross-Border Banking and Regulatory Reforms: What Africa Can Learn from International Experience

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**Canonical URL:** [Cross-Border Banking and Regulatory Reforms: What Africa Can Learn from International Experience](https://www.imf.org/-/media/files/news/seminars/session-i-daniela-bozena-presentation.pdf)

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### Overview
- Presentation by Daniela Marchettini and Bozena Radzewicz-Bak at a High Level Conference, IMF Africa Training Institute, Mauritius, February 1-2, 2017.
- Focus: implications of cross-border banking and regulatory reforms for Africa based on international experience.

### Expansion and Network Structures of Pan-African Banks
- Rapid expansion of selected Pan-African banks in the period 2002-2015.
- Expansion in Africa has frequently been undertaken through independently managed subsidiaries.
- Two contrasting network structures observed:
  - Dominant home (a bank concentrated in a single home market).
  - Dominant network (a bank with significant subsidiary presence across multiple countries).
- Visual indicators used to characterize network structures:
  - Ball size indicates asset share in consolidated assets of the subsidiary.
  - Red ball indicates a systemically important presence with a deposit share exceeding ten percent of banking system deposits.
- Example country presences highlighted include Nigeria, Côte d'Ivoire, Burkina Faso, Senegal, Benin, Cameroon, Mali, Kenya, R Congo, Chad, Niger, Gabon, Guinea, Liberia, CAR, Ghana, Rwanda, DRCongo, Zambia, Zimbabwe, Tanzania, Uganda, Guinea Bissau, Sierra Leone, Malawi, Burundi, Gambia, Equatorial Guinea, Cape Verde, Sao Tome and Principe, Togo, Mauritius, Namibia, Mozambique, Botswana, Lesotho, Angola, Swaziland.

### Potential Benefits from Pan-African Banks (PABs)
- Facilitate economic and financial integration.
- Transfer know-how, new technology and non-traditional business models.
- Foster competition and contribute to new financial products and services.
- Enhance financial inclusion.
- Provide financing for infrastructure projects.
- Syndicated and large bilateral loans for infrastructure financing include lending by African lenders, U.K. lenders, other European lenders, and other nationality lenders (charted for 2006–2015 measured in Billions of U.S. dollars).

### Potential Risks from Pan-African Banks (PABs)
- Risks from systemic presence.
- Risks from cross-border operations.
- Risks from financial conglomerates.
- Cross-border and cross-sector interlinkages.
- Spillover risks.

### Progress in Reforms and Remaining Challenges
- Areas of progress:
  - Efforts towards harmonization of capital standards and other prudential norms with international standards (EAC).
  - Upgrading banking laws to extend regulatory and supervisory powers.
  - Establishing supervisory colleges for selected banks with cross-border exposures.
  - Creating financial stability units, and considering or implementing macro-prudential policies to mitigate systemic risks.
- Areas of challenge:
  - Data availability on banks’ cross-border and cross-sector exposures poses constraints.
  - Unified accounting standards are not fully implemented.
  - Effective regulation and supervision of bank holding companies remain limited.
  - Cross-border crisis management and resolution remain an unfinished agenda.
  - Limited early intervention powers, potentially increasing costs of intervention and reducing effectiveness and resolution options.
- Sources informing assessment include IMF Technical Assistance (TA) Reports; IMF Financial Sector Assessment (FSAP) Reports; and C. Enoch, P. Mathieu, M. Mecagni “Pan-African Banks – Opportunities and Challenges for Cross-Border Oversight”, African Departmental Paper, 2015.

### Supervision and Standards: Gaps Identified
- More progress needed in consolidated and cross-border supervision.
- Compliance with Basel Core Principles assessed using the 2006 as well as 2012 Basel Core Principles methodology as part of FSAP during 2007-16.
- Coverage: 132 countries assessed, of which 32 from Africa.
- Comparative compliance metrics highlight gaps in consolidated supervision and in home-host relationships between SSA and the Rest of World (charted as percentages of compliance).

### Recommendations / Next Steps
- Address data gaps and strengthen high quality supervision (BCBS and G20 initiative).
- Conduct consolidated supervision across borders and sectors.
- Implement cross-border resolution and crisis management frameworks (FSB).
- Strengthen early intervention powers and legal frameworks for supervisory action.
- Enhance implementation of unified accounting standards and regulation of bank holding companies.

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_Source: https://www.imf.org/-/media/files/news/seminars/session-i-daniela-bozena-presentation.pdf_