## _afr1508

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---

### Financial soundness and banking concentration
- Small market size is identified as a major factor contributing to concentration, given the need for financial institutions to achieve economies of scale and scope.
- Presented indicators and data:
  - Figure 2.7: Share of banking assets held by the five largest banks, 1998–2011 (SSA MICs, SSA LICs, Other MICs, Other LICs; survey conducted in 2013).
  - Table 2.2 and Table 2.3: Financial Soundness Indicators (1996–2013) and Efficiency Indicators (2004–11*).
    - *Latest data available are from 2011.
    - Interest margin (% of assets), Overhead (% of assets), and Return on assets (before tax) reported for Low-income countries and Middle-income countries for 2004 and 2011.
    - Specific indicator excerpts as presented:
      - MICs in SSA: 9.2 8.3 7.8 14.5 18.9 10.6 26.3 28.8 27.5 44.4 43.9
      - LICs in SSA: 9.4 9.1 6.9 15.6 21.4 13.8 30.5 28.8 28.9 74.8 41.3
      - MICs in other regions: 8.5 15.6 1.9 14.1 17.1 9.4 20.0 21.2 26.6 65.5 39.9
      - LICs in other regions: 9.1 9.4 8 13.8 15.7 13.9 21.2 21.9 25.8 40.4 29.6

### Dollarization in Sub-Saharan Africa (SSA)
- Dollarization is a persistent characteristic of SSA countries under macroeconomically fragile conditions.
- Five most dollarized economies identified: Angola, Democratic Republic of the Congo, Liberia, São Tomé and Príncipe, Zambia.
  - Only Angola recorded a downward trend in both the share of bank deposits and loans denominated in foreign currency in the period considered.
  - Democratic Republic of the Congo, Liberia, and São Tomé and Príncipe recorded an upward trend during the recent decade.
- Figure 2.9 mapping (2001 and 2012) highlights:
  - Highly dollarized countries are natural resource–dependent: Angola, Democratic Republic of the Congo, Liberia, Mozambique, São Tomé and Príncipe, Zambia.
  - Number of countries with high deposit dollarization (above 30 percent) remained the same, but composition changed:
    - Tanzania and Mozambique reduced dollarization to below 30 percent;
    - Sierra Leone increased above 30 percent;
    - Zimbabwe became fully dollarized.
  - Number of countries with high loan dollarization rose from four (Angola, Mozambique, São Tomé and Príncipe, Tanzania) to six (Angola, Democratic Republic of the Congo, Liberia, São Tomé and Príncipe, Tanzania, Uganda).
- Data sources: IMF, International Financial Statistics Database and African Department Database.

### Ownership trends and role of Pan-African Banks (PABs)
- Since 1990, SSA banking systems shifted from majority state-owned to private-owned and toward higher foreign ownership (Table 2.4).
  - Example asset-share figures for state and foreign ownership (by period and income group) as presented:
    - MICs: 0.2 0.1 0.1 0.4 0.6 0.7
    - LICs: 0.3 0.2 0.1 0.4 0.4 0.6
- Restructuring of state-owned banks and financial liberalization facilitated entry of foreign institutions and higher competition.
- Pan-African Banks (PABs):
  - Driving financial innovation and development in Africa.
  - Contributing to financial integration and inclusion, and spurring competition.
  - Increasingly acting as lead arrangers of syndicated loans for SSA infrastructure financing, filling gaps left by European banks during the recent crisis.

### Cross-border credit flows and integration with international banks
- Cross-border claims from BIS-reporting banks used to approximate integration between SSA and the international banking system.
  - Cross-border exposure to SSA has remained broadly stable since 2007, at about US$180 billion.
  - The share of claims on SSA countries is small (less than 11 of total consolidated cross-border claims of BIS-reporting banks to non-European emerging markets) and has declined, reflecting orientation toward Asia.
  - Declining weight largely reflects reduction in cross-border claims to South Africa; cross-border exposure to other SSA countries has increased in recent years and remained broadly stable over the past decade.
- Post-crisis structural change:
  - Weight of traditional lenders (France, United Kingdom, Germany, United States) declined in favor of banks from other countries, driven by deleveraging and stricter regulation.
- Trends by country type:
  - Longer-term cross-border claims to SSA oil- and/or gas-rich countries have been on an increasing trend for more than a decade.
  - Claims to other SSA countries have fluctuated around a stable, low level.
  - In 2013, highest exposure outside South Africa was to resource-rich countries: Angola, Gabon, Ghana, Mozambique, Nigeria.
  - Relative to GDP, small island economies are large outliers (some are offshore financial centers); certain figures exclude Seychelles (228% of GDP) and Mauritius (103% of GDP).
  - Among non-resource-rich countries, frontier markets with favorable business environments or diversified economies (Kenya, Mauritius, Senegal, Ghana, Mozambique, Nigeria) attracted large bank flows.
  - Many fragile low-income countries have limited access to private bank funding despite resource endowments (Democratic Republic of the Congo, Niger, Sudan).

### Expansion of Pan-African Banks (PABs): opportunities and risks
- Rapid emergence and expansion of PABs created significant cross-border networks and, in some respects, are overtaking European and U.S. banks in SSA.
- Drivers of PAB expansion:
  - Improved political and macroeconomic stability.
  - Increasing trade linkages and economic integration.
  - Incentives for banks to follow customers abroad.
  - Diversification opportunities in markets with large unbanked populations.
- Market footprint:
  - Seven major PABs dominate in geographic footprint, each present in at least 10 African countries: three headquartered in Morocco, two in Togo, one in Nigeria, one in South Africa.
  - Additional banks from Kenya, Nigeria, and South Africa operate regionally (operations in at least five countries).
  - PABs expanded mainly through subsidiaries with differing strategies and structures regarding cross-border operations and share of consolidated assets.
  - PABs currently have a systemic presence in around 36 SSA countries and are now more important in the continent than long-established European and U.S. banks.
- Benefits:
  - Improved competition and support for financial inclusion.
  - Greater economies of scale and leadership in syndicated infrastructure financing.
  - Inducement for host authorities to upgrade supervisory and accounting norms.

### Regulatory oversight challenges and policy implications
- Rapid PAB expansion and systemic importance pose oversight challenges that could raise systemic risks via cross-border spillovers and contagion.
- Urgent issues identified:
  - Lack of formal regulatory oversight of bank holding companies in WAEMU and lack of consolidated supervision; at least two large PABs operate in the region as unregulated holding companies.
  - Fitness and propriety of owners and shareholders of PABs not always fully assessed; ownership structures can be opaque.
  - Limited availability of financial data in many countries and constrained exchange of data among supervisors due to national secrecy laws. Limited information on cross-border exposures within PABs impedes supervisors’ understanding of spillover risks.
  - Lack of a single accounting standard and differing levels of Basel implementation across the continent complicate assessment of banks’ overall situations.
- Cooperation on cross-border supervision has begun but needs intensification:
  - Examples: Central Bank of Nigeria memorandum of understanding requirement; quarterly West African Monetary Institute meetings; joint inspections and supervisory colleges in Kenya and EAC.
  - Recommendation: home authorities should establish supervisory colleges for all systemic PABs as the best vehicle for supervisors to exchange information.
- WAEMU-specific challenge:
  - Reconciling regional supervision with national responsibility for bank resolution is paramount given WAEMU’s role as home to major PABs.

### Box 4.1 — Financial Sector Supervisory Standards in Sub-Saharan Africa and Morocco: overview and country summary
- Overview:
  - SSA countries operate at varying stages of international standards implementation.
  - A number of countries have moved to International Financial Reporting Standards (IFRS), but Basel II implementation has been completed in only a handful of countries.
  - Depositor insurance is missing in the majority of countries.
- Selected country-level entries (accounting standard; capital adequacy / Basel II status; Basel Core Principles compliance; deposit insurance; asset classification threshold):
  - Angola — National; No Basel II yet; <50%; No Dep. Ins.; < 90 days
  - Botswana — IFRS; Basel II in progress; >80%; No Dep. Ins.; 90 days
  - Burundi — IFRS Plan; Basel II in progress; <50%; No Dep. Ins.; > 90 days
  - Cape Verde — IFRS; Basel II in progress; 50–80%; No Dep. Ins.; < 90 days
  - CEMAC — IFRS Plan; No Basel II yet; N/A; Implemented; > 90 days
  - Comoros — National; Basel II in progress; N/A; No Dep. Ins.; N/A
  - Dem. Rep. of the Congo — National; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - Eritrea — N/A; N/A; N/A; No Dep. Ins.; N/A
  - Ethiopia — IFRS Plan; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - Gambia — IFRS Plan; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - Ghana — IFRS; No Basel II yet; <50%; No Dep. Ins.; 90 days
  - Guinea — National; No Basel II yet; N/A; No Dep. Ins.; N/A
  - Kenya — IFRS; Parts of Basel II/III; 50–80%; Implemented; 90 days
  - Lesotho — IFRS; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - Liberia — IFRS; Basel II in progress; N/A; No Dep. Ins.; 90 days
  - Madagascar — National; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - Malawi — IFRS; Basel II; 50–80%; No Dep. Ins.; 90 days
  - Mauritius — IFRS; Basel II; 50–80%; No Dep. Ins.; 90 days
  - Morocco — IFRS; Parts of Basel III; >80%; Implemented; 90 days
  - Mozambique — IFRS; Basel II; 50–80%; No Dep. Ins.; > 90 days
  - Namibia — IFRS; Parts of Basel II; N/A; No Dep. Ins.; 90 days
  - Nigeria — IFRS; Basel II in progress; 50–80%; Implemented; 90 days
  - Rwanda — IFRS; Basel II in progress; >80%; No Dep. Ins.; 90 days
  - São Tomé and Principe — IFRS Plan; Basel II in progress; N/A; No Dep. Ins.; N/A
  - Seychelles — IFRS Plan; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - Sierra Leone — IFRS; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - South Africa — IFRS; Basel III; >80%; No Dep. Ins.; 90 days
  - South Sudan — National; No Basel II yet; N/A; No Dep. Ins.; N/A
  - Swaziland — IFRS; No Basel II yet; N/A; No Dep. Ins.; 90 days
  - Uganda — IFRS; No Basel II yet; 50–80%; Implemented; 90 days
  - Tanzania — IFRS; No Basel II yet; >80%; Implemented; 90 days
  - WAEMU — IFRS Plan; No Basel II yet; 50–80%; No Dep. Ins.; > 90 days
  - Zambia — IFRS; No Basel II yet; >80%; No Dep. Ins.; 90 days
  - Zimbabwe — IFRS; Basel II in progress; N/A; Implemented; 91 days
- Notes:
  - IFRS = International Financial Reporting Standards; CEMAC = Central African Economic and Monetary Community; WAEMU = West African Economic and Monetary Union.
  - "Asset Classification" indicates the threshold of "number of days in arrears" after which loans are classified as nonperforming.
  - Basel Core Principles percentage shows percentage of compliant or largely compliant assessments against the 2006 Basel Core Principles methodology (assessments undertaken as part of Financial Sector Assessment Programs during 2007–12).
  - Basel II column is based on Financial Stability Institute survey answers to Pillar 1, Pillar 2, and Pillar 3.

### Key findings, recommendations, and implementation priorities
- Implementation status and gaps:
  - A number of SSA countries have adopted IFRS; Basel II implementation ranges from "No Basel II yet" to "Basel II implemented" or "Basel II in progress".
  - Deposit insurance is absent in the majority of countries; a minority have implemented deposit insurance (CEMAC, Kenya, Morocco, Nigeria, Rwanda, Uganda, Tanzania, Zimbabwe, and others).
  - Basel Core Principles compliance varies: <50%, 50–80%, and >80% across countries.
  - Asset classification thresholds vary: 90 days, > 90 days, 91 days, < 90 days, and N/A.
- Policy recommendations and priorities:
  - Foster financial inclusion:
    - Leverage mobile banking and enable telecommunication operators to collaborate with financial institutions.
  - Remove structural impediments to credit and improve market structure:
    - Reform legal and judicial systems to enhance recovery of collateral.
    - Establish or improve credit registries.
    - Consider alternatives to collateralization (for example, group guarantees).
    - Build accounting and financial sector skills.
  - Enhance governance and regulations:
    - Strengthen governance with clear and even-handed application of legal and regulatory frameworks.
    - Support reforms with commercial courts and specialized judges.
    - Review and harmonize commercial law, accounting and auditing standards, and related practices, especially where cross-border banking has grown.
  - Improve the environment for nonbank financial institutions:
    - Strengthen legal and regulatory frameworks for insurance companies, credit unions, leasing companies, microfinance institutions, and other hybrid providers.
  - Strengthen bank supervision:
    - Enhance supervisory practices, on- and off-site techniques to identify firm-level and system-wide emerging risks.
    - Increase operational independence and adequate resources for supervisors and end supervisory forbearance.
    - Ensure banks hold high-quality capital, adequate liquidity, robust internal risk management, and strong corporate governance.
  - Enhance cross-border cooperation and consolidated supervision:
    - Strengthen oversight capacity for Pan-African Banking groups (PABs) through strategic collaboration between home regulators and central banks of major PABs.
    - Use joint inspections, colleges, training inclusion of host-country supervisors, staff exchanges, and peer-learning initiatives.
- Implementation and capacity:
  - Many priority areas require strengthening capacity and extensive technical assistance.
  - The IMF is providing assistance in its areas of responsibility and liaising with other multilaterals and national providers to prioritize a comprehensive program to enhance capacity to supervise banking activities and PABs' cross-border operations.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/dp/2015/_afr1508.pdf*

### 2.7 and 2.8). As stressed by Gulde and others (2006), the small market size is seen as a major

### _afr1508 - 2.7 and 2.8). As stressed by Gulde and others (2006), the small market size is seen as a major

### Financial soundness and banking concentration
- Small market size is identified as a major factor contributing to concentration, given the need for financial institutions to achieve economies of scale and scope.  
- Figure 2.7: Share of banking assets held by the five largest banks, 1998–2011 — presented for SSA MICs, SSA LICs, Other MICs, Other LICs (survey conducted in 2013).  
- Table 2.2 and Table 2.3 provide Financial Soundness Indicators (1996–2013) and Efficiency Indicators (2004–11*).  
  - *Latest data available are from 2011.  
  - Interest margin (% of assets), Overhead (% of assets), and Return on assets (before tax) reported for Low-income countries and Middle-income countries for 2004 and 2011.  
  - Specific indicator excerpts as presented in tables:  
    - MICs in SSA: 9.2 8.3 7.8 14.5 18.9 10.6 26.3 28.8 27.5 44.4 43.9  
    - LICs in SSA: 9.4 9.1 6.9 15.6 21.4 13.8 30.5 28.8 28.9 74.8 41.3  
    - MICs in other regions: 8.5 15.6 1.9 14.1 17.1 9.4 20.0 21.2 26.6 65.5 39.9  
    - LICs in other regions: 9.1 9.4 8 13.8 15.7 13.9 21.2 21.9 25.8 40.4 29.6

### Dollarization in Sub-Saharan Africa (SSA)
- Dollarization—use of foreign currencies as medium of exchange, store of value, or unit of account—is a persistent characteristic of SSA countries under macroeconomically fragile conditions.  
- Five most dollarized economies identified: Angola, Democratic Republic of the Congo, Liberia, São Tomé and Príncipe, Zambia.  
  - Only Angola recorded a downward trend in both the share of bank deposits and loans denominated in foreign currency in the period considered.  
  - Democratic Republic of the Congo, Liberia, and São Tomé and Príncipe recorded an upward trend during the recent decade.  
- Figure 2.9 maps dollarization in SSA in 2001 and 2012:  
  - All most highly dollarized countries in the region (Angola, Democratic Republic of the Congo, Liberia, Mozambique, São Tomé and Príncipe, Zambia) are natural resource–dependent economies.  
  - Number of countries with high deposit dollarization (above 30 percent) remained the same over the period, but composition changed: Tanzania and Mozambique reduced dollarization to below 30 percent; Sierra Leone increased above 30 percent; Zimbabwe became fully dollarized.  
  - Number of countries with high loan dollarization rose from four (Angola, Mozambique, São Tomé and Príncipe, Tanzania) to six (Angola, Democratic Republic of the Congo, Liberia, São Tomé and Príncipe, Tanzania, Uganda).  
- Data sources cited: IMF, International Financial Statistics Database and African Department Database.

### Ownership trends and role of Pan-African Banks (PABs)
- Since 1990, banking systems in SSA shifted from majority state-owned to private-owned banking and toward higher levels of foreign ownership (Table 2.4).  
  - Example asset-share figures for state and foreign ownership (by period and income group) as presented:  
    - MICs: 0.2 0.1 0.1 0.4 0.6 0.7  
    - LICs: 0.3 0.2 0.1 0.4 0.4 0.6  
- Restructuring of state-owned banks and financial liberalization allowed entry of foreign banking institutions and contributed to higher competition.  
- Increasingly, foreign ownership includes banks headquartered in other African countries (pan-African banks or PABs), which are:  
  - Driving financial innovation and development in Africa.  
  - Contributing to financial integration and inclusion, and spurring innovation and competition.  
  - Playing an increasing role as lead arrangers of syndicated loans for SSA infrastructure financing, filling gaps left by European banks during the recent crisis.

### Cross-border credit flows and integration with international banks
- International banks’ exposure to SSA has remained relatively small in absolute terms and compared with other regions, but significant relative to many recipient countries’ GDPs.  
- Cross-border claims from BIS-reporting banks used as approximation of integration between SSA and international banking system.  
  - Cross-border exposure to SSA countries has remained broadly stable since 2007, at a magnitude of about US$180 billion.  
  - The share of claims on SSA countries is small (less than 11 of total consolidated cross-border claims of BIS-reporting banks to non-European emerging markets) and has declined over the years, reflecting orientation toward countries in Asia.  
  - Declining weight largely reflects reduction in cross-border claims to South Africa; cross-border exposure to other SSA countries has increased in recent years and remained broadly stable over the past decade.  
- Structure of international bank flows changed after the global financial crisis: weight of traditional lenders (France, United Kingdom, Germany, United States) declined in favor of banks from other countries. Causes include deleveraging by European banks and stricter regulatory requirements.  
- Longer-term cross-border claims to SSA oil- and/or gas-rich countries have been on an increasing trend for more than a decade (Figure 3.5). Claims to other SSA countries have fluctuated around a stable, low level (Figure 3.6).  
- In 2013, highest exposure of international banks outside South Africa was to resource-rich countries: Angola, Gabon, Ghana, Mozambique, Nigeria (Figure 3.7).  
- Relative to GDP, small island economies are large outliers (some being offshore financial centers). Excludes Seychelles (228% of GDP) and Mauritius (103% of GDP) from certain figures.  
- Among non-resource-rich countries, frontier markets with favorable business environments or diversified economies (Kenya, Mauritius, Senegal, Ghana, Mozambique, Nigeria) attracted large bank flows. Many fragile low-income countries have limited access to private bank funding despite resource endowments (Democratic Republic of the Congo, Niger, Sudan).

### Expansion of Pan-African Banks (PABs): opportunities and risks
- Emergence and rapid expansion of PABs created significant cross-border networks and, in some respects, are overtaking European and U.S. banks in SSA.  
- Drivers of PAB expansion include improved political and macroeconomic stability, increasing trade linkages and economic integration, incentives for banks to follow customers abroad, and diversification opportunities in markets with large unbanked populations.  
- Seven major PABs dominate in terms of geographic footprint, each with presence in at least 10 African countries. Three headquartered in Morocco, two in Togo, one in Nigeria, one in South Africa.  
- Additional banks from Kenya, Nigeria, and South Africa have regional presence (operations in at least five countries). PABs expanded mainly through subsidiaries with differing strategies and structures regarding cross-border operations and share of consolidated assets (Figures 4.1–4.3).  
- PABs currently have a systemic presence in around 36 SSA countries and are now more important in the continent than long-established European and U.S. banks (Figure 4.4).  
- Benefits of PAB expansion: improved competition, support for financial inclusion, greater economies of scale, leadership in syndicated infrastructure financing, and inducement for host authorities to upgrade supervisory/accounting norms.

### Regulatory oversight challenges and policy implications
- Rapid PAB expansion and systemic importance pose oversight challenges that could raise systemic risks if unaddressed: greater interconnectedness increases exposure to cross-border spillovers and contagion.  
- Urgent issues identified:  
  - Lack of formal regulatory oversight of bank holding companies in WAEMU and lack of consolidated supervision; at least two large PABs operate in the region as unregulated holding companies.  
  - Fitness and propriety of owners and shareholders of PABs not always fully assessed; ownership structures can be opaque.  
  - Limited availability of financial data in many countries and constrained exchange of data among supervisors due to national secrecy laws. Limited information on cross-border exposures within PABs impedes supervisors’ understanding of spillover risks.  
  - Lack of a single accounting standard and differing levels of Basel implementation across the continent complicate assessment of banks’ overall situations.  
- Cooperation on cross-border supervision has begun (examples: Central Bank of Nigeria memorandum of understanding requirement; quarterly West African Monetary Institute meetings; joint inspections and supervisory colleges in Kenya and EAC), but needs intensification.  
  - Recommendation highlighted: home authorities should establish supervisory colleges for all systemic PABs as the best vehicle for supervisors to exchange information.  
- Regional currency unions (WAEMU) face particular challenges reconciling regional supervision with national responsibility for bank resolution; reconciling regional and national interests is paramount given WAEMU’s role as home to major PABs.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/dp/2015/_afr1508.pdf*

### Box 4.1. Financial Sector Supervisory Standards in Sub-Saharan Africa and Morocco

### Box 4.1. Financial Sector Supervisory Standards in Sub-Saharan Africa and Morocco

### Overview
- Countries in SSA are at different development levels with regard to their financial sector regulation and supervision standards and operate at varying stages of international standards implementation.
- A number of countries have moved to International Financial Reporting Standards (IFRS), but implementation of Basel II standards has been completed in only a handful of countries.
- An important part of depositor protection, namely depositor insurance, is missing in the majority of countries.

### Summary of Supervisory Standards by Country
- Angola — Accounting Standard: National; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: <50%; Deposit Insurance: No Dep. Ins.; Asset Classification: < 90 days
- Botswana — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: >80%; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Burundi — Accounting Standard: IFRS Plan; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: <50%; Deposit Insurance: No Dep. Ins.; Asset Classification: > 90 days
- Cape Verde — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: 50–80%; Deposit Insurance: No Dep. Ins.; Asset Classification: < 90 days
- CEMAC — Accounting Standard: IFRS Plan; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: Implemented; Asset Classification: > 90 days
- Comoros — Accounting Standard: National; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: N/A
- Dem. Rep. of the Congo — Accounting Standard: National; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Eritrea — Accounting Standard: N/A; Capital Adequacy Standard: N/A; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: N/A
- Ethiopia — Accounting Standard: IFRS Plan; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Gambia — Accounting Standard: IFRS Plan; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Ghana — Accounting Standard: IFRS; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: <50%; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Guinea — Accounting Standard: National; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: N/A
- Kenya — Accounting Standard: IFRS; Capital Adequacy Standard: Parts of Basel II/III; Basel Core Principles: 50–80%; Deposit Insurance: Implemented; Asset Classification: 90 days
- Lesotho — Accounting Standard: IFRS; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Liberia — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Madagascar — Accounting Standard: National; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Malawi — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II; Basel Core Principles: 50–80%; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Mauritius — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II; Basel Core Principles: 50–80%; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Morocco — Accounting Standard: IFRS; Capital Adequacy Standard: Parts of Basel III; Basel Core Principles: >80%; Deposit Insurance: Implemented; Asset Classification: 90 days
- Mozambique — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II; Basel Core Principles: 50–80%; Deposit Insurance: No Dep. Ins.; Asset Classification: > 90 days
- Namibia — Accounting Standard: IFRS; Capital Adequacy Standard: Parts of Basel II; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Nigeria — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: 50–80%; Deposit Insurance: Implemented; Asset Classification: 90 days
- Rwanda — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: >80%; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- São Tomé and Principe — Accounting Standard: IFRS Plan; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: N/A
- Seychelles — Accounting Standard: IFRS Plan; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Sierra Leone — Accounting Standard: IFRS; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- South Africa — Accounting Standard: IFRS; Capital Adequacy Standard: Basel III; Basel Core Principles: >80%; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- South Sudan — Accounting Standard: National; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: N/A
- Swaziland — Accounting Standard: IFRS; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: N/A; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Uganda — Accounting Standard: IFRS; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: 50–80%; Deposit Insurance: Implemented; Asset Classification: 90 days
- Tanzania — Accounting Standard: IFRS; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: >80%; Deposit Insurance: Implemented; Asset Classification: 90 days
- WAEMU — Accounting Standard: IFRS Plan; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: 50–80%; Deposit Insurance: No Dep. Ins.; Asset Classification: > 90 days
- Zambia — Accounting Standard: IFRS; Capital Adequacy Standard: No Basel II yet; Basel Core Principles: >80%; Deposit Insurance: No Dep. Ins.; Asset Classification: 90 days
- Zimbabwe — Accounting Standard: IFRS; Capital Adequacy Standard: Basel II in progress; Basel Core Principles: N/A; Deposit Insurance: Implemented; Asset Classification: 91 days

Notes from the table:
- IFRS = International Financial Reporting Standards; CEMAC = Central African Economic and Monetary Community; WAEMU = West African Economic and Monetary Union.
- The "Asset Classification" category indicates the threshold of "number of days in arrears" after which loans are classified as nonperforming loans.
- The Basel Core Principles percentage shows percentage of compliant or largely compliant assessments against the 2006 Basel Core Principles methodology (assessments undertaken as part of Financial Sector Assessment Programs during 2007–12).
- The Basel II column is based on Financial Stability Institute survey answers to Pillar 1 (standardized approach for credit risk, basic indicator approach, and standardized approach for operational risk), Pillar 2, and Pillar 3.

### Key Findings and Context
- Implementation status:
  - A number of SSA countries have adopted IFRS (explicitly listed per country above).
  - Basel II implementation status ranges from "No Basel II yet" to "Basel II implemented" or "Basel II in progress"; only a handful have completed Basel II.
- Deposit insurance coverage:
  - Deposit Insurance is "No Dep. Ins." for the majority of countries in the table.
  - A minority of countries have Deposit Insurance: CEMAC, Kenya, Morocco, Nigeria, Rwanda, Uganda, Tanzania, Zimbabwe, and others as indicated above.
- Basel Core Principles compliance:
  - Reported compliance levels include values such as <50%, 50–80%, and >80% across countries.
- Asset classification thresholds vary by country and include values such as 90 days, > 90 days, 91 days, < 90 days, and N/A.

### Policy Recommendations and Priorities
- Foster financial inclusion:
  - Leverage mobile banking and enable telecommunication operators to collaborate with financial institutions, taking stock of SSA experiences that have fostered innovations in payment systems, savings, and credit flows.
- Remove structural impediments to credit and improve market structure:
  - Reform legal and judicial systems to enhance recovery of collateral.
  - Establish or improve credit registries where needed.
  - Consider alternatives to collateralization (for example, group guarantees).
  - Build accounting and financial sector skills.
- Enhance governance and regulations:
  - Strengthen governance with clear and even-handed application of legal and regulatory frameworks.
  - Support reforms with commercial courts and specialized judges.
  - Review and harmonize commercial law, accounting and auditing standards, and related practices, especially where cross-border banking has grown.
- Improve the environment for nonbank financial institutions:
  - Strengthen legal and regulatory frameworks for insurance companies, credit unions, leasing companies, microfinance institutions, and other hybrid providers.
- Strengthen bank supervision:
  - Enhance supervisory practices, on- and off-site techniques to identify firm-level and system-wide emerging risks.
  - Increase operational independence and adequate resources for supervisors and end supervisory forbearance.
  - Ensure banks hold high-quality capital, adequate liquidity, robust internal risk management, and strong corporate governance.
- Enhance cross-border cooperation and consolidated supervision:
  - Strengthen oversight capacity for Pan-African Banking groups (PABs) through strategic collaboration between home regulators and central banks of major PABs.
  - Use joint inspections, colleges, training inclusion of host-country supervisors, staff exchanges, and peer-learning initiatives.

### Implementation and Capacity
- Many priority areas require strengthening capacity and extensive technical assistance.
- The IMF is providing assistance in its areas of responsibility and liaising with other multilaterals and national providers to prioritize a comprehensive program to enhance capacity to supervise banking activities and PABs' cross-border operations.

*Sources: IFRS.org (Jurisdiction Profiles, April 2014) and Pricewaterhouse Coopers report "IFRS adoption by country" (April 2013); FSI Survey on Basel II, 2.5, and III implementation (Financial Stability Institute, July 2014); Standards and Codes Database; Demirgüç-Kunt et al (2015); IMF Financial Sector Assessment Program and Technical Assistance reports.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/dp/2015/_afr1508.pdf_