Banking Sector Sanctioned by Imprisonment and Fine

Strengthening Prudential Regime in Senegal’s Banking Sector

The WAEMU Council of Ministers has taken a significant step to strengthen the prudential regime in Senegal’s banking sector. To address activities that contravene regulations, credit institutions can face imprisonment for one month to two years and/or a fine of XOF10-100 million. In cases of repeated offenses, the maximum penalty will be increased to five years’ imprisonment and a fine of XOF300 million.

Prudential Regime

The prudential system is a crucial component of the 2008 Banking Law, adopted by the WAEMU Council of Ministers on the proposal of the BCEAO. The system aims to establish a framework for regulating credit institutions in Senegal and other member states of the West African Economic and Monetary Union (WAEMU).

The prudential regime requires credit institutions to maintain minimum capital requirements based on risks such as:

Credit risk
Operational risk
Market risk

The Basel II and Basel III rules have been transposed to take into account the characteristics of the economies and specificities of the WAEMU banking system.

Insolvency, Recovery, and Resolution

The legal and regulatory framework governing insolvency, recovery, and resolution of banks is governed by the OHADA Uniform Act on the Organization of Collective Procedures. The act provides for three procedures:

Preventive settlement
Judicial recovery
Liquidation of assets

Sanction for Non-Compliance

In the event of non-compliance with the prudential regime, credit institutions may be subject to:

Imprisonment for one month to two years
A fine of XOF10-100 million
In cases of repeated offenses, the maximum penalty will be increased to five years’ imprisonment and a fine of XOF300 million

Creditors’ Rights

In the event of insolvency, creditors cannot pursue individual procedures against defaulting debtors. Instead, collective procedures may be imposed on creditors of a company in difficulty. In the case of liquidation of a credit institution, bank account holders will be reimbursed immediately after:

Creditors of legal costs have been paid
Super-privileged wages have been paid

Key Attributes of Effective Resolution Regimes

Despite efforts to strengthen the prudential regime, there is no evidence of implementation by the Senegalese government of the FSB Key Attributes of Effective Resolution Regimes.