Financial Crime World

Banking Regulations Compliance in Cape Verde Leaves Room for Improvement

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A recent report by the World Bank has highlighted several areas where Cape Verde’s financial reporting infrastructure falls short of international standards. The Report on the Observance of Standards and Codes (ROSC) assesses the country’s compliance with six key pillars of financial reporting infrastructure, including:

Statutory Framework

  • Adaptation of International Financial Reporting Standards (IFRS) for private companies
  • Full adoption of IFRS for banking and insurance institutions

Despite these advancements, Cape Verde still lacks a tradition of financial analysis. There are no credit-rating agencies or reliance on corporate financial statements by banks. Instead, lenders heavily rely on collaterals to manage credit risks.

Professional Education and Training

  • The Bank of Cape Verde has mandated IFRS for banks and insurance companies since 2008
  • However, there is a need for greater capacity among regulators to cope with the demands of IFRS-compliant financial reporting

The report also highlights the need for improved regulation of micro-finance institutions, which are currently unregulated.

Recommendations for Improvement

  • Enact a Financial Reporting Act that focuses on all regulatory aspects of accounting and auditing
  • Provide a legal framework for financial reporting and help strengthen institutional capacity

The World Bank’s ROSC assessment aims to assist Cape Verde in developing and implementing a country action plan to enhance corporate financial reporting infrastructure. The report provides valuable insights into the strengths and weaknesses of the country’s financial reporting system, offering recommendations for improvement.

Conclusion

Cape Verde has made significant progress in adapting IFRS for private companies and fully adopting IFRS for banking and insurance institutions. However, there is still room for improvement in terms of regulation, capacity building, and financial analysis. By enacting a Financial Reporting Act and strengthening institutional capacity, Cape Verde can further improve its corporate financial reporting infrastructure and align with international standards.