Banking Regulations Compliance in Cape Verde Falls Short: Report Reveals Need for Improvement

A recent assessment has revealed that Cape Verde’s banking regulations compliance is lacking in several areas, despite efforts to strengthen its financial reporting infrastructure. The report, which focused on six pillars of financial reporting, found that while the country has recognized the importance of a strong corporate financial reporting architecture, there are still significant gaps to be addressed.

Challenges in Financial Analysis

One area of concern is the lack of tradition in financial analysis within the country, except for within financial institutions when issuing credit. This means that banks do not rely on corporate financial statements and instead manage credit risks using collaterals.

• The report highlights the absence of a culture of financial analysis among businesses in Cape Verde.
• As a result, banks are unable to assess the creditworthiness of companies based on their financial statements.

Credit-Rating Agencies and IFRS Compliance

The report also found that there are no credit-rating agencies in Cape Verde, making it difficult to assess the creditworthiness of companies. Additionally, while the Bank of Cape Verde has mandated International Financial Reporting Standards (IFRS) for banks and insurance companies since 2008, regulators still need building up to cope with the demands of IFRS-compliant financial reporting.

• The lack of credit-rating agencies hinders the ability to assess the creditworthiness of companies.
• Regulators require more capacity-building to effectively implement IFRS-compliant financial reporting.

Regulatory Gaps and Challenges

The central bank has also expressed its intention to regulate micro-finance institutions, which are currently unregulated. To improve the legal framework of corporate financial reporting, a Financial Reporting Act is needed, focusing on all regulatory aspects of accounting and auditing.

• A comprehensive approach is required to address the gaps and challenges in Cape Verde’s financial reporting infrastructure.
• Strengthening institutional capacity and enhancing corporate financial reporting will require addressing these issues.

Conclusion

The report concludes that strengthening institutional capacity and enhancing corporate financial reporting in Cape Verde requires a comprehensive approach that addresses these gaps and challenges. By implementing the necessary reforms, the country can improve its banking regulations compliance and enhance its financial stability.