Senegal Banks Must Meet Risk Thresholds Defined by Basel III

Lagos, Nigeria - The West African Economic and Monetary Union (WAEMU) has set minimum capital requirements for Senegalese banks operating in the zone. As of 2018, banks must maintain a minimum capital level of 8.625% of their risk-weighted assets.

Risk-Weighted Assets

The risk-weighted assets are divided into two categories: core capital (CET1) and conservation buffer. The core capital accounts for 5% of the total, while the conservation buffer makes up 0.625%. This means that Senegalese banks must have at least XOF5 billion in core capital and XOF65 million in conservation buffer.

Insolvency, Recovery, and Resolution

In the event of insolvency or difficulty, Senegalese law provides for three procedures:

• Preventive settlement: allows companies to avoid insolvency by entering into a preventive composition agreement.
• Judicial recovery: aims to safeguard the company and pay off its liabilities.
• Liquidation of assets: involves realizing the debtor’s assets to pay off their liabilities.

The Commission Bancaire must approve any proceedings against credit institutions. In the event of liquidation, the commission will take a decision on the withdrawal of authorization and winding up of the institution.

FSB Key Attributes of Effective Resolution Regimes

However, there is no evidence that Senegalese authorities have implemented the Financial Stability Board’s (FSB) key attributes of effective resolution regimes.

Creditors’ Rights

Under Senegalese law, all creditors are concerned with these procedures. Creditors cannot pursue individual recovery against a defaulting debtor but must follow collective procedures imposed by the court.

In the event of liquidation, bank account holders will be reimbursed immediately after the payment of legal costs and super-privileged wages up to an amount determined by the competent judicial authority.

ESG Requirements

Senegal does not have specific banking regulatory requirements related to Environmental, Social, and Governance (ESG) matters. However, credit institutions are encouraged to implement or strengthen their environmental, social, and governance responsibility by adopting international ESG standards.

Banks and financial institutions may voluntarily adopt ESG requirements tailored to their specific structure and activities.

By adhering to these guidelines, Senegalese banks aim to maintain a stable financial system while ensuring the protection of creditors’ rights.