Title: IMF Reviews Democratic Republic of Congo’s Financial Sector Amid Macrofinancial Vulnerabilities

Overview

The International Monetary Fund (IMF) conducted a virtual Financial Sector Stability Review (FSSR) for the Democratic Republic of Congo (DRC) from January 5 to 28, 2022, at the request of the Central Bank of Congo (BCC). The mission aimed to:

• Assess the state of the financial system
• Evaluate progress on past IMF technical assistance (TA) recommendations
• Develop a Technical Assistance Roadmap

Findings and Macrofinancial Vulnerabilities

The FSSR identified five macrofinancial vulnerabilities that pose risks to the stability of the DRC’s financial sector:

1. Capital base of the banking industry

• The banking sector requires improvement in its capital adequacy and liquidity to withstand economic shocks.

2. Evaluating nonperforming loans post-COVID-19 financial support measures

• Assessment of assets quality is challenging due to the complexities created by pandemic-induced financial support measures.

3. Financial dollarization risks

• A significant portion of the Congolese economy relies on US dollars, exposing the country and its financial institutions to external shocks.

4. Correspondent banking relationships and ‘de-risking’

• Instances of correspondent banks terminating or reducing services to Congolese banks could result in critical financial services loss.

5. Intragroup exposures

• Subsidiary banks in DRC place surplus funds with parent companies abroad, increasing their reliance on foreign banks and subjecting them to additional risk.

Adoption of COVID-19 exit measures

The BCC’s adoption of COVID-19 exit measures in December 2021, which include specific reporting requirements, is expected to provide momentum for additional technical assistance in the near future. This assistance is vitally important for the BCC to analyze banks’ asset quality in a timely and effective manner.