Cameroon’s Banking Sector Faces Challenges in Supervision and Licensing

YAOUNDE, Cameroon - A recent Financial Sector Assessment Program (FSAP) mission has highlighted concerns over the supervision and licensing of banks in Cameroon.

Challenges in Supervision and Licensing

The country’s banking sector faces significant challenges due to inadequate human resources and a lack of effective supervision. According to the FSAP report, COBAC, the national authority responsible for supervising banks, is struggling to ensure compliance with international standards.

• COBAC lacks the necessary resources to effectively monitor the banking sector.
• The licensing process has been criticized for being too lenient and lacking transparency.
• Microfinance institutions are not subject to a real licensing procedure, and some have been allowed to operate without proper registration.

Strengthening Prudential Regulations

The report highlights the need for prudential regulations to be strengthened. Currently, capital requirements and internal control regulations are less stringent than international standards. The authorities intend to review these rules in the near future to bring them in line with international best practices.

Effective Supervision

While COBAC has prioritized on-site supervision, it faces challenges due to its limited resources. The report recommends that the authority rely more heavily on external auditors and intensify relations with bank boards of directors to strengthen corporate governance.

Improved Information Requirements

The FSAP mission also identified a need for improved information requirements. While banks are required to submit annual reports, COBAC lacks the legal authority to determine their contents. The report suggests that this responsibility be transferred to COBAC to ensure greater transparency and accountability.

Effective Corrective Actions

Finally, the report highlights the importance of effective corrective actions in cases where banks fail to comply with regulations. While COBAC has the power to impose corrective action, it lacks the authority to remove members of bank boards of directors. The report recommends that more stringent rules be established to handle infringements and crisis situations.

Conclusion

Overall, the FSAP mission concludes that while Cameroon’s banking sector faces significant challenges, there is a clear commitment from authorities to improve supervision and regulation. With adequate resources and support, COBAC can play a crucial role in ensuring the stability and integrity of the country’s financial system.