## Democratic Republic of the Congo: Financial System Stability Assessment

_IMF Staff Country Reports, October 22, 2014_

## Source details

**Canonical URL:** [Democratic Republic of the Congo: Financial System Stability Assessment](https://www.imf.org/en/publications/cr/issues/2016/12/31/democratic-republic-of-the-congo-financial-system-stability-assessment-42410)

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## Bibliographic details
- Published: October 22, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484394779.002

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### Executive summary and system-wide findings
- The Congolese financial sector has recovered from the crisis of 2009 but is "at a crossroads."
- The system remains shallow, highly dollarized, and characterized by balance sheet fragilities.
- The authorities have announced a de-dollarization process; however, greater progress on reforms to strengthen the financial system is needed to support financial deepening and economic growth.
- The team’s analysis suggests that the financial system remains vulnerable.
- Resilience to shocks is undermined by:
  - Lack of risk-based supervision.
  - Lax regulation and weak enforcement of existing regulations.
  - Low profitability.
  - Excessive reliance on sight deposits.
- Assessments of bank-specific and systemic soundness are severely handicapped by weak supervisory data and other information gaps.
- There are significant weaknesses in accounting and auditing practices.
- Even if indicators suggest high capitalization levels, a more detailed analysis suggests banks are under-provisioned, partly owing to lax definitions of nonperforming loans and provisioning rules.

### Supervisory and regulatory deficiencies
- Critical need to implement risk-based supervision for individual banks; described as "a critical prerequisite for effective crisis prevention."
- Steps are needed to improve capacity for microprudential and macroprudential supervision.
- Weak supervisory data and information gaps severely limit bank-specific and systemic soundness assessments.
- Lax definitions of nonperforming loans and provisioning rules contribute to under-provisioning despite superficially high capitalization indicators.

### Structural and market features constraining stability and deepening
- Shallow financial system limiting intermediation and financial deepening.
- High degree of dollarization in the financial system.
- Banking sector fragilities are linked to balance sheet weaknesses and funding model concentration (excessive reliance on sight deposits).

### Policy implications and recommended priorities (derived from the assessment)
- Advance reforms to strengthen the financial system to support financial deepening and economic growth.
- Implement and operationalize risk-based supervision for individual banks to improve crisis prevention.
- Strengthen regulation and enforcement of existing regulations to address lax regulatory practices.
- Enhance supervisory data quality and close information gaps to enable accurate assessments of bank soundness.
- Improve accounting and auditing practices to ensure financial statements reflect true balance sheet conditions.
- Tighten definitions of nonperforming loans and provisioning rules to correct under-provisioning.
- Build capacity for both microprudential and macroprudential supervision.
- Progress on the announced de-dollarization process to reduce currency mismatches and enhance monetary policy effectiveness.

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_Source: https://www.imf.org/en/publications/cr/issues/2016/12/31/democratic-republic-of-the-congo-financial-system-stability-assessment-42410_