## 1. Priority Recommendations

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### Mission outcomes (December 2-6, 2024)
- The Statistics Department (STA) of the IMF conducted a virtual technical assistance (TA) mission on financial soundness indicators (FSIs) for the Central Bank of the Republic of Guinea (CBRG).
- Mission objectives:
  - Assist CBRG staff in compiling FSIs using the new reporting templates to ensure consistency with the IMF's 2019 FSI Compilation Guide (2019 FSIs Guide).
  - Review available source data, institutional coverage, and accounting and regulatory frameworks used in FSI production for deposit-takers (DTs).
  - Develop a workplan for compiling and disseminating FSIs.
- Funding and encouragement:
  - The IMF’s African Department (AFR) encouraged the mission; funded by the Financial Sector Stability Fund (FSSF).
- Achievements:
  - Compiled a new core FSI and two additional FSIs for DTs in collaboration with CBRG staff.
  - Aligned definitions of several FSIs for DTs with the 2019 FSIs Guide (Appendix B).
  - Developed bridge tables mapping income statements, balance sheets, and prudential data for DTs to the new FSI reporting templates.
  - Completed the new metadata template (FSM) and the Institutional Coverage Report (FSIC) form.
  - Agreed timetable: finalize metadata and FSI reporting templates by end-June 2025 for STA review; publish on IMF FSI website by end-July 2025.

### Key institutional and methodological findings
- Prior production:
  - CBRG compiled and reported FSIs to STA previously, but production and dissemination stopped in June 2022.
  - Previously compiled: 12 core FSIs, 11 additional FSIs for DTs, and two additional FSIs for real estate markets (not aligned with 2019 FSIs Guide).
- Current coverage and consolidation:
  - FSIs for DTs are compiled on a domestic location (DL) consolidation basis.
  - Institutional coverage of DTs currently encompasses commercial banks only.
- Accounting and regulatory frameworks:
  - Regulatory framework: broadly compliant with Basel II; CBRG has started work toward Basel III.
  - Accounting framework: DTs measure financial instruments according to IFRS 9 since January 2023 and use the expected credit loss model for provisioning.
- Source data adequacy:
  - Source data for compiling FSIs for DTs is adequate and generally meets the 2019 FSIs Guide criteria.
  - Primary source data: income statements, balance sheets, and supervisory series collected monthly or quarterly.
  - Prudential reports used to calculate FSIs (transmitted within 15 days after the reference period):
    - SITU_1, 2, 3: Financial position (monthly)
    - FINS_10: Income statement (monthly)
    - PRUD_4: Statement of calculation of net equity (quarterly)
    - PRUD_5: Statement of calculation of the solvency ratio (quarterly)
    - PRUD_6: Large exposures diversification and concentration (quarterly)
- Compilation process:
  - Bridge tables and compilation worksheets were developed to map source data to Table 5.1 of the FSI-SRs for DTs.
  - CBRG currently aggregates data manually; automation of FSI calculation is recommended.

### Priority recommendations (Table 1 summary)
- Target: June 2025
  - Report to STA for review the FSI sectoral financial statements (FSI-SRs) for DTs, including income and expense statement, balance sheet, and supervisory series from 2013Q1 onwards, the FSIC, and the FSM. (Responsible: CBRG)
- Target: July 2025
  - Start regular reporting to STA for DTs: the FSI-SRs (on a quarterly basis), the FSIC (annually), and the FSM through the Integrated Collection System (ICS) for release on the IMF’s FSIs website. (Responsible: CBRG)

### Detailed Action Plan — prioritized actions and target completion dates
- Priority (PR)
  - Report to STA for review the FSI-SRs for DTs, including income and expense statement, balance sheet, and supervisory series from 2013Q1 onwards, the FSIC and the FSM. — Target Completion Date: June 2025
  - Start regular reporting to STA for DTs, the FSI-SRs (on a quarterly basis), the FSIC (annually), and the FSM through the ICS for release on the IMF’s FSIs website. — Target Completion Date: July 2025
- High (H)
  - Start using the bridge tables developed by the mission to compile FSIs for DTs that are consistent with the 2019 FSIs Guide. — Target Completion Date: June 2025
  - Align the calculation of ROA and ROE with the definition given in the 2019 FSIs Guide. — Target Completion Date: July 2025
  - Align the definition of customer deposits (liabilities side of the balance sheet) with that of the 2019 FSIs Guide. — Target Completion Date: July 2025
  - Compile the spread between reference lending and deposit rate. — Target Completion Date: July 2025
  - Compile new FSIs: provisions to nonperforming loans (NPLs), credit growth to private sector and trading income to total income. — Target Completion Date: July 2025
- Medium (M)
  - Reclassify extraordinary items from the income statement to other income/expenditure. — Target Completion Date: July 2025
  - Short-term liabilities: collect and include deposits with a residual maturity of three months or less. Otherwise, note the deviation from the 2019 FSIs Guide in the metadata. — Target Completion Date: December 2025
  - Liquid assets: collect and include deposits with a maturity of three months or less. Otherwise, note the deviation from the 2019 FSIs Guide in the metadata. — Target Completion Date: December 2025
  - Collect data from DTs on loans to NFCs by economic sector based on ISIC (Revision 4) and compile the loan concentration ratio by economic activity. — Target Completion Date: December 2026

### New reporting expectations
- The mission extended the list of FSIs reported to STA:
  - New compilation includes 13 core FSIs and eight additional FSIs for DTs.
  - All FSIs should be compiled and reported to STA on a quarterly basis.

### Financial system structure and key statistics (at end-September 2024, Table 2)
- Aggregate balance sheet of commercial banks: 68,288,691 million Guinean Francs (approx. 91 percent of total DT sector).
- DT sector totals (Table 2):
  - Deposit-taking institutions: Number of institutions 35; Total assets 70,031,289; Share in total financial system assets 93.8%
  - Commercial banks: Number of institutions 19; Total assets 68,288,691; Share 91.4%
    - domestically controlled: Number of institutions 2; Total assets 1,029,670
    - foreign controlled: Number of institutions 17; Total assets 67,259,020
  - Deposit-taking microfinance institutions: Number of institutions 16; Total assets 1,742,598; Share 2.4%
  - Other financial corporations: Number of institutions 17; Total assets 4,660,781; Share 6.2%
  - Insurance companies: Number of institutions 11; Total assets 3,431,985; Share 4.6%
    - Life insurance: Number of institutions 4; Total assets 1,091,300; Share 1.5%
    - Nonlife insurance: Number of institutions 7; Total assets 2,340,685; Share 3.1%
  - Non-deposit taking microfinance institutions: Number of institutions 4; Total assets 13,338; Share 0.02%
  - Other financial intermediaries and financial auxiliaries (leasing company, national investment bank): Number of institutions 2; Total assets 1,215.458; Share 1.6%
  - Total: Number of institutions 52; Total assets 74,692,070; Share 100%
- Notes in Table 2:
  - 1. December 2023
  - 2. June 2024
- Coverage:
  - 19 commercial banks in Guinea: 2 domestically controlled, 17 foreign controlled; no cross-border or cross-sector subsidiaries.
  - 16 deposit-taking microfinance institutions (DTMFIs) with varying reporting frequency; hence commercial banks are the only category included in FSIs coverage.

### Doubtful claim provisioning rules (Table 3)
- Category — Expected credit loss rate (percent)
  - Fully performing claims (Group 1) — 1
  - Group 2 claims without past due payments — 5
  - Group 2 claims with payments past due for more than 30 days — 15
  - Group 2 claims with payments past due for more than 60 days — 25
  - Group 3 claims (nonperforming) with payments past due for more than 6 months — 50
  - Group 3 claims that have been nonperforming for 6 months or more — 90

### Regulatory capital requirements (Basel II framework applied)
- Minimum requirements for credit institutions:
  - Common equity capital must represent at least 6.5 percent of the credit institution's RWA;
  - Tier 1 capital must represent at least 8 percent of the credit institution's RWA;
  - Total regulatory capital must represent at least 10 percent of the credit institution's RWA.
- Regulatory instructions referenced:
  - CBRG instructions 104/DGSIF/DSB/2022 and 106/DGSIF/DSB/2022 define components of regulatory capital and RWA.
- NPL definition and provisioning:
  - NPLs defined as loans with part of principal or interest post-due for more than 90 days since contractual maturity.
  - Accrued interest on bad debts is not recognized in income until actually received.
  - CBRG regulations 093/DGSIF/DSB/PCEC and 099/DGSIF/DSB set NPLs and minimum provision requirements.

### Recommended data collection improvements
- Collect data on liquid assets and short-term liabilities, including deposits maturing in three months or less.
- Collect data on lending to nonfinancial corporations (NFCs) by industry sector (ISIC, Revision 4) and compile loan concentration ratios by economic activity.
- Improve frequency and consistency of DTMFI reporting; consider including DTMFIs in FSI compilation where feasible.
- Automate FSI calculation based on reporting templates to reduce manual processing.

### Deposit-taking Institutions — Sectoral financial statements: Key methodological differences and reclassifications
- FSIs compiled during the mission follow the 2019 FSIs Guide; existing FSIs compiled by the CBRG used definitions aligned with the 2006 FSIs Guide. Differences are explained in Appendix C.
- Bridge tables were updated to reflect methodological changes in the 2019 FSIs Guide; a few accounts were reclassified in the income statement and sectoral balance sheet and incorporated in the mission bridge tables.
- Revenue and expense components in the declaration report are fully aligned with Annex 2 of the old FS2 template, facilitating mapping to income/expenses for profitability indicators.
- Extraordinary income/expenditure reclassified to other income/expenditure to align with IAS1 (2019 FSIs Guide); historical profitability indicators need restatement.
  - Recommendation: Reclassify extraordinary items from the income statement to other income/expenditure.
- Table 4 — Reclassification summary (Income statement and Balance sheet):
  - Income Statement:
    1. Extraordinary gains / losses reclassified to other income/expenditure.
    2. Unrecoverable claims reclassified to provisions for doubtful claims instead of other expenditure.
  - Balance Sheet:
    3. Cumulative depreciation should be deducted from nonfinancial assets rather than recorded in other liabilities.
    4. DTs' deposits (on the asset side of the balance sheet) in another DT should be reclassified as interbank loans to align with the 2019 FSIs Guide methodology.
    5. The definition of customer deposits (liabilities) has been revised to align with the 2019 FSIs Guide.
    6. Provisions for other losses have been reclassified to general and other provisions instead of other liabilities.

### Profitability, deposits, liquid assets, and short-term liabilities
- Profitability indicators (ROA and ROE)
  - ROA: annualized before-tax net income divided by total average assets.
  - ROE: annualized after-tax net income divided by average total capital.
  - The 2019 FSIs Guide recommends using net profit before tax for ROA and net profit after tax for ROE; this was not previously the case.
  - Recommendation: Align the calculation of ROA and ROE with the definition of the 2019 FSIs Guide.
- Customer deposits, liquid assets, and short-term liabilities definitions
  - Customer deposits definition revised: excludes central bank and central government deposits; deposits of OFCs, central government, central bank, and restricted deposits were reclassified to other cash and deposits rather than customer deposits.
    - Recommendation: Align the definition of customer deposits (liabilities) with the 2019 FSIs Guide.
  - Liquid assets definition was not aligned with the 2019 FSIs Guide prior to the mission; CBRG included cash, transferable deposits, other deposits, and debt securities.
    - Recommendation: Collect and include deposits with a maturity of three months or less; otherwise, note the deviation in metadata.
    - Mission recommended excluding debt securities not actively traded in Guinea from liquid assets and assisted compilers to exclude them in the bridge table.
  - Short-term liabilities definition not aligned: CBRG had included only transferable deposits due to lack of breakdown of other liabilities.
    - Recommendation: Collect and include deposits with a residual maturity of three months or less; otherwise, note the deviation in metadata.

### Interest spread and supervisory indicators
- Mission assisted CBRG to calculate the spread between reference lending and deposit rates (for reporting to STA) using the 2019 FSIs Guide second approach:
  - Reference lending rate ≈ interest income (lending) / gross non-interbank loans (weighted-average approximation).
  - Deposit rate ≈ interest expenses / customer deposits.
  - Recommendation: Compile the spread between reference lending and deposit rates.
- Large spreads interpretation: may indicate less competitive pressure, bank inefficiency, or insufficient collateral.

### New and revised FSIs compiled during the mission
- New FSIs compiled:
  - Provisions-to-NPL ratio (new core FSI): specific provisions (provisions against NPLs) / total NPLs — measures extent to which NPLs are covered.
  - Credit growth to private sector (new additional FSI): annual growth rate of credit to private NFCs, households, NPISHs, plus debt securities issued by private NFCs and held by DTs.
  - Trading income to total gross income (new additional FSI): trading income (gains and losses on financial instruments) / gross income (net interest income + noninterest income).
  - Loan concentration by economic activity (new core FSI replacing sectoral distribution of loans): measures credit concentration risk in the three main NFC subsectors, using ISIC, Revision 4 classification.
- Recommendation: Collect data from DTs on lending to NFCs by economic sector (ISIC, Rev.4) and compile the loan concentration ratio by economic activity.
- Recommendation for supervisory series data collection:
  - Collect data on deposits and liabilities with residual maturity up to three months to align liquid assets and short-term liabilities with 2019 FSIs Guide.

### Metadata, reporting, and capacity building
- Following source data matching to the new FSI sectoral financial statement template, CBRG will start reporting FSIs for DTs to STA for dissemination as from June 2024.
  - CBRG should align definitions of currently produced FSIs with the 2019 FSIs Guide.
- Mission recommended CBRG notify STA of metadata accompanying FSI publication; mission updated metadata tables 2 and 3 for Guinea.
  - Metadata should provide information on banking sector structure, accounting and regulatory frameworks relative to 2019 FSIs Guide methodology.
- Resources and training:
  - Mission encouraged CBRG staff to participate in IMF training courses on financial sector statistics (regional and HQ). CBRG staff compiling FSIs for DTs would benefit from STA training at IMF HQ (held every two years) and regional centers.

### FSIs for DTs, 2023:Q1 to 2023:Q4 (selected core and additional FSIs)
- Core FSIs (2023:Q1 2023:Q2 2023:Q3 2023:Q4)
  - Regulatory capital to risk-weighted assets: 17.0 16.9 16.1 15.1
  - Common equity Tier 1 capital to risk-weighted assets: 16.9 16.8 16.1 15.2
  - Nonperforming loans net of provisions to capital: 14.48 14.1 15.4 15.5
  - Common equity Tier 1 capital to assets: 10.0 10.8 10.5 10.1
  - Nonperforming loans to total loans: 8.4 8.6 8.8 8.9
  - Provisions to nonperforming loans: 55.3 56.6 55.1 55.8
  - Return on assets: 3.5 3.8 4.0 3.9
  - Return on equity: 22.6 23.5 23.5 23.8
  - Interest margin to gross income: 42.1 35.8 37.7 41.8
  - Noninterest expenses to gross income: 67.6 67.7 64.9 62.0
  - Liquid assets to total assets: 32.5 28.9 27.4 27.3
  - Net assets to short-term liabilities: 56.7 49.0 46.9 47.0
  - Net open position in foreign exchange to capital: 8.7 2.2 2.2 7.8
- Additional FSIs (2023:Q1 2023:Q2 2023:Q3 2023:Q4)
  - Large exposures to capital: 111.8 119.2 115.3 110.8
  - Personnel expenses to noninterest expenses: 20.2 17.5 19.2 33.5
  - Spread between reference lending and deposit rates (basis points): 446.8 458.3 430.4 452.3
  - Customer deposits to total (non-interbank) loans: 179.2 177.8 169.4 172.4
  - Foreign currency denominated loans to total loans: 20.9 16.8 12.1 12.7
  - Foreign-currency-denominated liabilities to total liabilities: 30.6 30.4 28.3 27.9
  - Credit growth to private sector: 19.5 20.2 10.9 8.7
- Sources: CBRG and IMF staff.

### Appendix C — Comparison of FSIs before and after the mission (selected recommendations)
- Regulatory capital to risk-weighted assets:
  - Numerator: Change in calculation (from Basel I to Basel II as from November 2022)
  - Denominator: Change in calculation (from Basel I to Basel II as from November 2022)
- Common equity Tier 1 capital to risk-weighted assets:
  - Numerator: Change in calculation (from Basel I to Basel II as from November 2022)
  - Denominator: Change in calculation (from Basel I to Basel II as from November 2022)
- Non-performing loans net of provisions to capital:
  - Numerator: Change in method of calculating provisions (from IAS39 to IFRS9 as from January 2023)
  - Denominator: Change in calculation (from Basel I to Basel II as from November 2022)
- Tier 1 capital to assets:
  - Numerator: Common equity Tier 1 capital
  - Denominator: Total assets (cumulative depreciation must be deducted from nonfinancial assets)
- Nonperforming loans to total loans:
  - Numerator: No change
  - Denominator: Change (includes DT deposits in another DT)
- Loan concentration by economic activity:
  - New FSI to replace the sectoral distribution of loans (to be implemented)
  - Numerator: Lending to the three leading economic sectors
  - Denominator: Loans to NFCs
- Provisions to nonperforming loans:
  - New FSI compiled during the mission
  - Numerator: Provisions on NPLs
  - Denominator: NPLs
- Return on assets:
  - Numerator: Net income before taxes (annualized). Extraordinary items must be adjusted to other income/expenditure
  - Denominator: Average total assets
- Return on equity:
  - Numerator: Net income after tax (annualized)
  - Denominator: Average capital and reserves
- Trading income to gross income:
  - New FSI compiled during the mission for 2024:Q1
  - Numerator: Trading Income
  - Denominator: Gross income
- Spread between reference lending and deposit rates (basis points):
  - Calculated as the difference between interest income on loans divided by non-interbank loans and interest expense on loans divided by customer deposits
- Customer deposits to total (non-interbank) loans:
  - Numerator: Customer deposits (2019 FSIs Guide)
  - Denominator: Total (non-interbank) loans
- Credit growth to private sector:
  - New FSI compiled during the mission
  - Credit to the private sector includes loans to NFCs and households, and securities issued by NFCs held by DTs.

_Imf | Technical Report – Guinea  Financial Soundness Indicators_

### 1. Priority Recommendations ............................................................................................

### 1. Priority Recommendations

### Mission outcomes (December 2-6, 2024)
- The Statistics Department (STA) of the IMF conducted a virtual technical assistance (TA) mission on financial soundness indicators (FSIs) for the Central Bank of the Republic of Guinea (CBRG).
- The mission objectives were to:
  - Assist CBRG staff in compiling FSIs using the new reporting templates to ensure consistency with the IMF's 2019 FSI Compilation Guide (2019 FSIs Guide).
  - Review available source data, institutional coverage, and accounting and regulatory frameworks used in FSI production for deposit-takers (DTs).
  - Develop a workplan for compiling and disseminating FSIs.
- Funding and encouragement:
  - The IMF’s African Department (AFR) encouraged the mission; funded by the Financial Sector Stability Fund (FSSF).
- Achievements:
  - Compiled a new core FSI and two additional FSIs for DTs in collaboration with CBRG staff.
  - Aligned definitions of several FSIs for DTs with the 2019 FSIs Guide (Appendix B).
  - Developed bridge tables mapping income statements, balance sheets, and prudential data for DTs to the new FSI reporting templates.
  - Completed the new metadata template (FSM) and the Institutional Coverage Report (FSIC) form.
  - Agreed a timetable: finalize metadata and FSI reporting templates by end-June 2025 for STA review; publish on IMF FSI website by end-July 2025.

### Key institutional and methodological findings
- Prior production:
  - CBRG compiled and reported FSIs to STA previously, but production and dissemination stopped in June 2022.
  - Previously compiled: 12 core FSIs, 11 additional FSIs for DTs, and two additional FSIs for real estate markets (not aligned with 2019 FSIs Guide).
- Current coverage and consolidation:
  - FSIs for DTs are compiled on a domestic location (DL) consolidation basis.
  - Institutional coverage of DTs currently encompasses commercial banks only.
- Accounting and regulatory frameworks:
  - Regulatory framework: broadly compliant with Basel II; CBRG has started work toward Basel III.
  - Accounting framework: DTs measure financial instruments according to IFRS 9 since January 2023 and use the expected credit loss model for provisioning.
- Source data adequacy:
  - Source data for compiling FSIs for DTs is adequate and generally meets the 2019 FSIs Guide criteria.
  - Primary source data: income statements, balance sheets, and supervisory series collected monthly or quarterly.
  - Prudential reports used to calculate FSIs (transmitted within 15 days after the reference period):
    - SITU_1, 2, 3: Financial position (monthly)
    - FINS_10: Income statement (monthly)
    - PRUD_4: Statement of calculation of net equity (quarterly)
    - PRUD_5: Statement of calculation of the solvency ratio (quarterly)
    - PRUD_6: Large exposures diversification and concentration (quarterly)
- Compilation process:
  - Bridge tables and compilation worksheets were developed to map source data to Table 5.1 of the FSI-SRs for DTs.
  - CBRG currently aggregates data manually; automation of FSI calculation is recommended.

### Priority recommendations (Table 1 summary)
- Target: June 2025
  - Report to STA for review the FSI sectoral financial statements (FSI-SRs) for DTs, including income and expense statement, balance sheet, and supervisory series from 2013Q1 onwards, the FSIC, and the FSM. (Responsible: CBRG)
- Target: July 2025
  - Start regular reporting to STA for DTs: the FSI-SRs (on a quarterly basis), the FSIC (annually), and the FSM through the Integrated Collection System (ICS) for release on the IMF’s FSIs website. (Responsible: CBRG)

### Detailed Action Plan — prioritized actions and target completion dates
- Priority (PR)
  - Report to STA for review the FSI-SRs for DTs, including income and expense statement, balance sheet, and supervisory series from 2013Q1 onwards, the FSIC and the FSM. — Target Completion Date: June 2025
  - Start regular reporting to STA for DTs, the FSI-SRs (on a quarterly basis), the FSIC (annually), and the FSM through the ICS for release on the IMF’s FSIs website. — Target Completion Date: July 2025
- High (H)
  - Start using the bridge tables developed by the mission to compile FSIs for DTs that are consistent with the 2019 FSIs Guide. — Target Completion Date: June 2025
  - Align the calculation of ROA and ROE with the definition given in the 2019 FSIs Guide. — Target Completion Date: July 2025
  - Align the definition of customer deposits (liabilities side of the balance sheet) with that of the 2019 FSIs Guide. — Target Completion Date: July 2025
  - Compile the spread between reference lending and deposit rate. — Target Completion Date: July 2025
  - Compile new FSIs: provisions to nonperforming loans (NPLs), credit growth to private sector and trading income to total income. — Target Completion Date: July 2025
- Medium (M)
  - Reclassify extraordinary items from the income statement to other income/expenditure. — Target Completion Date: July 2025
  - Short-term liabilities: collect and include deposits with a residual maturity of three months or less. Otherwise, note the deviation from the 2019 FSIs Guide in the metadata. — Target Completion Date: December 2025
  - Liquid assets: collect and include deposits with a maturity of three months or less. Otherwise, note the deviation from the 2019 FSIs Guide in the metadata. — Target Completion Date: December 2025
  - Collect data from DTs on loans to NFCs by economic sector based on ISIC (Revision 4) and compile the loan concentration ratio by economic activity. — Target Completion Date: December 2026

### New reporting expectations
- The mission extended the list of FSIs reported to STA:
  - New compilation includes 13 core FSIs and eight additional FSIs for DTs.
  - All FSIs should be compiled and reported to STA on a quarterly basis.

### Financial system structure and key statistics (at end-September 2024, Table 2)
- Aggregate balance sheet of commercial banks: 68,288,691 million Guinean Francs (approx. 91 percent of total DT sector).
- DT sector totals (Table 2):
  - Deposit-taking institutions: Number of institutions 35; Total assets 70,031,289; Share in total financial system assets 93.8%
  - Commercial banks: Number of institutions 19; Total assets 68,288,691; Share 91.4%
    - domestically controlled: Number of institutions 2; Total assets 1,029,670
    - foreign controlled: Number of institutions 17; Total assets 67,259,020
  - Deposit-taking microfinance institutions: Number of institutions 16; Total assets 1,742,598; Share 2.4%
  - Other financial corporations: Number of institutions 17; Total assets 4,660,781; Share 6.2%
  - Insurance companies: Number of institutions 11; Total assets 3,431,985; Share 4.6%
    - Life insurance: Number of institutions 4; Total assets 1,091,300; Share 1.5%
    - Nonlife insurance: Number of institutions 7; Total assets 2,340,685; Share 3.1%
  - Non-deposit taking microfinance institutions: Number of institutions 4; Total assets 13,338; Share 0.02%
  - Other financial intermediaries and financial auxiliaries (leasing company, national investment bank): Number of institutions 2; Total assets 1,215.458; Share 1.6%
  - Total: Number of institutions 52; Total assets 74,692,070; Share 100%
- Notes in Table 2:
  - 1. December 2023
  - 2. June 2024
- Coverage:
  - 19 commercial banks in Guinea: 2 domestically controlled, 17 foreign controlled; no cross-border or cross-sector subsidiaries.
  - 16 deposit-taking microfinance institutions (DTMFIs) with varying reporting frequency; hence commercial banks are the only category included in FSIs coverage.

### Doubtful claim provisioning rules (Table 3)
- Category — Expected credit loss rate (percent)
  - Fully performing claims (Group 1) — 1
  - Group 2 claims without past due payments — 5
  - Group 2 claims with payments past due for more than 30 days — 15
  - Group 2 claims with payments past due for more than 60 days — 25
  - Group 3 claims (nonperforming) with payments past due for more than 6 months — 50
  - Group 3 claims that have been nonperforming for 6 months or more — 90

### Regulatory capital requirements (Basel II framework applied)
- Minimum requirements for credit institutions:
  - Common equity capital must represent at least 6.5 percent of the credit institution's RWA;
  - Tier 1 capital must represent at least 8 percent of the credit institution's RWA;
  - Total regulatory capital must represent at least 10 percent of the credit institution's RWA.
- Regulatory instructions referenced:
  - CBRG instructions 104/DGSIF/DSB/2022 and 106/DGSIF/DSB/2022 define components of regulatory capital and RWA.
- NPL definition and provisioning:
  - NPLs defined as loans with part of principal or interest post-due for more than 90 days since contractual maturity.
  - Accrued interest on bad debts is not recognized in income until actually received.
  - CBRG regulations 093/DGSIF/DSB/PCEC and 099/DGSIF/DSB set NPLs and minimum provision requirements.

### Recommended data collection improvements
- Collect data on liquid assets and short-term liabilities, including deposits maturing in three months or less.
- Collect data on lending to nonfinancial corporations (NFCs) by industry sector (ISIC, Revision 4) and compile loan concentration ratios by economic activity.
- Improve frequency and consistency of DTMFI reporting; consider including DTMFIs in FSI compilation where feasible.
- Automate FSI calculation based on reporting templates to reduce manual processing.

_Imf | Technical Report – Guinea  Financial Soundness Indicators_

### 25. There are a number of differences between the existing FSIs, compiled by the CBRG, and

### Deposit-taking Institutions — Sectoral financial statements

### Key methodological differences and reclassifications
- The FSIs compiled during the mission follow the compilation methodology recommended by the 2019 FSIs Guide; existing FSIs compiled by the CBRG used definitions aligned with the 2006 FSIs Guide. Differences are explained in Appendix C.
- Bridge tables were updated to reflect methodological changes in the 2019 FSIs Guide; a few accounts were reclassified in the income statement and sectoral balance sheet and incorporated in the mission bridge tables.
- Revenue and expense components in the declaration report are fully aligned with Annex 2 of the old FS2 template, facilitating mapping to income/expenses for profitability indicators.
- Extraordinary income/expenditure reclassified to other income/expenditure to align with IAS1 (2019 FSIs Guide); historical profitability indicators need restatement.
  - Recommendation: Reclassify extraordinary items from the income statement to other income/expenditure.

- Table 4 — Reclassification summary (Income statement and Balance sheet):
  - Income Statement:
    1. Extraordinary gains / losses reclassified to other income/expenditure.
    2. Unrecoverable claims reclassified to provisions for doubtful claims instead of other expenditure.
  - Balance Sheet:
    3. Cumulative depreciation should be deducted from nonfinancial assets rather than recorded in other liabilities.
    4. DTs' deposits (on the asset side of the balance sheet) in another DT should be reclassified as interbank loans to align with the 2019 FSIs Guide methodology.
    5. The definition of customer deposits (liabilities) has been revised to align with the 2019 FSIs Guide.
    6. Provisions for other losses have been reclassified to general and other provisions instead of other liabilities.

### Profitability indicators (ROA and ROE)
- The mission realigned ROA and ROE calculations to the 2019 FSIs Guide methodology.
  - ROA: annualized before-tax net income divided by total average assets.
  - ROE: annualized after-tax net income divided by average total capital.
- The 2019 FSIs Guide recommends using net profit before tax for ROA and net profit after tax for ROE; this was not previously the case.
  - Recommendation: Align the calculation of ROA and ROE with the definition of the 2019 FSIs Guide.

### Customer deposits, liquid assets, and short-term liabilities definitions
- Customer deposits definition revised: excludes central bank and central government deposits; deposits of OFCs, central government, central bank, and restricted deposits were reclassified to other cash and deposits rather than customer deposits.
  - Recommendation: Align the definition of customer deposits (liabilities) with the 2019 FSIs Guide.
- Liquid assets definition was not aligned with the 2019 FSIs Guide prior to the mission; CBRG included cash, transferable deposits, other deposits, and debt securities.
  - Recommendation: Collect and include deposits with a maturity of three months or less; otherwise, note the deviation in metadata.
  - Mission recommended excluding debt securities not actively traded in Guinea from liquid assets and assisted compilers to exclude them in the bridge table.
- Short-term liabilities definition not aligned: CBRG had included only transferable deposits due to lack of breakdown of other liabilities.
  - Recommendation: Collect and include deposits with a residual maturity of three months or less; otherwise, note the deviation in metadata.

### Interest spread and supervisory indicators
- Mission assisted CBRG to calculate the spread between reference lending and deposit rates (for reporting to STA) using the 2019 FSIs Guide second approach:
  - Reference lending rate ≈ interest income (lending) / gross non-interbank loans (weighted-average approximation).
  - Deposit rate ≈ interest expenses / customer deposits.
  - Recommendation: Compile the spread between reference lending and deposit rates.
- Large spreads interpretation: may indicate less competitive pressure, bank inefficiency, or insufficient collateral.

### New and revised FSIs compiled during the mission
- The mission compiled a newly introduced core FSI and two additional FSIs for DTs to be reported to STA; primary data are available in declaration reports and consistent with the 2019 FSIs Guide.
  - Provisions-to-NPL ratio (new core FSI): specific provisions (provisions against NPLs) / total NPLs — measures extent to which NPLs are covered.
  - Credit growth to private sector (new additional FSI): annual growth rate of credit to private NFCs, households, NPISHs, plus debt securities issued by private NFCs and held by DTs — captures emerging systemic risks and can be a leading indicator of asset quality problems.
  - Trading income to total gross income (new additional FSI): trading income (gains and losses on financial instruments) / gross income (net interest income + noninterest income) — measures reliance on market-related activities. Calculated using the new bank income statement template introduced in 2024.
  - Recommendation: Compile new FSIs: Provisions to NPLs, credit growth to private sector, and trading income to gross income.
- Loan concentration by economic activity (new core FSI replacing sectoral distribution of loans):
  - Measures credit concentration risk in the three main NFC subsectors, using lending classification based on ISIC, Revision 4.
  - Recommendation: Collect data from DTs on lending to NFCs by economic sector (ISIC, Rev.4) and compile the loan concentration ratio by economic activity.
- Recommendation for supervisory series data collection:
  - Collect data on deposits and liabilities with residual maturity up to three months to align liquid assets and short-term liabilities with 2019 FSIs Guide.

### Metadata, reporting, and capacity building
- Following source data matching to the new FSI sectoral financial statement template, CBRG will start reporting FSIs for DTs to STA for dissemination as from June 2024.
  - CBRG should align definitions of currently produced FSIs with the 2019 FSIs Guide.
- Mission recommended CBRG notify STA of metadata accompanying FSI publication; mission updated metadata tables 2 and 3 for Guinea.
  - Metadata should provide information on banking sector structure, accounting and regulatory frameworks relative to 2019 FSIs Guide methodology.
- Resources and training:
  - Mission encouraged CBRG staff to participate in IMF training courses on financial sector statistics (regional and HQ). CBRG staff compiling FSIs for DTs would benefit from STA training at IMF HQ (held every two years) and regional centers. Detailed information available on the IMF Institute for Capacity Development website.

### FSIs for DTs, 2023:Q1 to 2023:Q4 (selected core and additional FSIs)
- Core FSIs (2023:Q1 2023:Q2 2023:Q3 2023:Q4)
  - Regulatory capital to risk-weighted assets: 17.0 16.9 16.1 15.1
  - Common equity Tier 1 capital to risk-weighted assets: 16.9 16.8 16.1 15.2
  - Nonperforming loans net of provisions to capital: 14.48 14.1 15.4 15.5
  - Common equity Tier 1 capital to assets: 10.0 10.8 10.5 10.1
  - Nonperforming loans to total loans: 8.4 8.6 8.8 8.9
  - Provisions to nonperforming loans: 55.3 56.6 55.1 55.8
  - Return on assets: 3.5 3.8 4.0 3.9
  - Return on equity: 22.6 23.5 23.5 23.8
  - Interest margin to gross income: 42.1 35.8 37.7 41.8
  - Noninterest expenses to gross income: 67.6 67.7 64.9 62.0
  - Liquid assets to total assets: 32.5 28.9 27.4 27.3
  - Net assets to short-term liabilities: 56.7 49.0 46.9 47.0
  - Net open position in foreign exchange to capital: 8.7 2.2 2.2 7.8
- Additional FSIs (2023:Q1 2023:Q2 2023:Q3 2023:Q4)
  - Large exposures to capital: 111.8 119.2 115.3 110.8
  - Personnel expenses to noninterest expenses: 20.2 17.5 19.2 33.5
  - Spread between reference lending and deposit rates (basis points): 446.8 458.3 430.4 452.3
  - Customer deposits to total (non-interbank) loans: 179.2 177.8 169.4 172.4
  - Foreign currency denominated loans to total loans: 20.9 16.8 12.1 12.7
  - Foreign-currency-denominated liabilities to total liabilities: 30.6 30.4 28.3 27.9
  - Credit growth to private sector: 19.5 20.2 10.9 8.7
- Sources: CBRG and IMF staff.

### Appendix C — Comparison of FSIs before and after the mission (selected recommendations)
- Regulatory capital to risk-weighted assets:
  - Numerator: Change in calculation (from Basel I to Basel II as from November 2022)
  - Denominator: Change in calculation (from Basel I to Basel II as from November 2022)
- Common equity Tier 1 capital to risk-weighted assets:
  - Numerator: Change in calculation (from Basel I to Basel II as from November 2022)
  - Denominator: Change in calculation (from Basel I to Basel II as from November 2022)
- Non-performing loans net of provisions to capital:
  - Numerator: Change in method of calculating provisions (from IAS39 to IFRS9 as from January 2023)
  - Denominator: Change in calculation (from Basel I to Basel II as from November 2022)
- Tier 1 capital to assets:
  - Numerator: Common equity Tier 1 capital
  - Denominator: Total assets (cumulative depreciation must be deducted from nonfinancial assets)
- Nonperforming loans to total loans:
  - Numerator: No change
  - Denominator: Change (includes DT deposits in another DT)
- Loan concentration by economic activity:
  - New FSI to replace the sectoral distribution of loans (to be implemented)
  - Numerator: Lending to the three leading economic sectors
  - Denominator: Loans to NFCs
- Provisions to nonperforming loans:
  - New FSI compiled during the mission
  - Numerator: Provisions on NPLs
  - Denominator: NPLs
- Return on assets:
  - Numerator: Net income before taxes (annualized). Extraordinary items must be adjusted to other income/expenditure
  - Denominator: Average total assets
- Return on equity:
  - Numerator: Net income after tax (annualized)
  - Denominator: Average capital and reserves
- Trading income to gross income:
  - New FSI compiled during the mission for 2024:Q1
  - Numerator: Trading Income
  - Denominator: Gross income
- Spread between reference lending and deposit rates (basis points):
  - Calculated as the difference between interest income on loans divided by non-interbank loans and interest expense on loans divided by customer deposits
- Customer deposits to total (non-interbank) loans:
  - Numerator: Customer deposits (2019 FSIs Guide)
  - Denominator: Total (non-interbank) loans
- Credit growth to private sector:
  - New FSI compiled during the mission
  - Credit to the private sector includes loans to NFCs and households, and securities issued by NFCs held by DTs.

*IMF | Technical Report – Guinea  Financial Soundness Indicators*

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_Source: https://www.imf.org/-/media/files/publications/tar/2025/english/tarea2025072-source-pdf.pdf_