Financial Crime World

Banking Regulations Compliance in Cape Verde Under Scrutiny as Country Eyes Strengthened Institutional Capacity

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A recent assessment of financial reporting infrastructure in Cape Verde has revealed both strengths and weaknesses in the country’s corporate financial reporting practices. The report, which focused on six key pillars, aims to help develop a country action plan for strengthening institutional capacity.

Assessment Findings

The assessment highlights the importance of a robust corporate financial reporting architecture in Cape Verde. Key findings include:

  • Adoption of International Financial Reporting Standards (IFRS) for private companies and fully implemented IFRS for banking and insurance institutions
  • Lack of tradition in financial analysis, with no credit-rating agencies operating in the country

Challenges Faced by Banks

Banks in Cape Verde face unique challenges when it comes to corporate financial reporting. Specifically:

  • No reliance on corporate financial statements; instead, banks manage credit risks using collaterals
  • The Bank of Cape Verde mandated IFRS for banks and insurance companies in 2008, but regulators are still building capacity to cope with the demands of IFRS-compliant financial reporting

Expanding Regulatory Scope

The central bank is set to expand its regulatory scope to include micro-finance institutions, which are currently unregulated. This move aims to strengthen institutional capacity and promote a more robust corporate financial reporting environment.

To further improve the legal framework for corporate financial reporting, a Financial Reporting Act is needed. The act should focus on all regulatory aspects of accounting and auditing.

Conclusion

The assessment highlights the importance of strengthening institutional capacity in Cape Verde to enhance corporate financial reporting practices. With the country’s banking sector playing a vital role in economic development, ensuring compliance with regulations is crucial for maintaining investor confidence and promoting sustainable growth.