Financial Crime World

Banking Sector in WAEMU Countries: A Report on Regulation and Risk Management

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Introduction

This report provides an overview of the banking sector in West African Economic and Monetary Union (WAEMU) countries, specifically Senegal. It covers various aspects of banking regulation, including risk management, capital requirements, and insolvency procedures.

Risk Management

The Basel Committee’s framework is applied to assess credit risk, operational risk, and market risk. The key highlights are:

  • Credit Risk: Banks must hold a level of core capital corresponding to a minimum threshold of 5% of their exposure to credit risk.
  • Operational Risk: A conservation buffer has been introduced at a maximum level of 2.5% of the bank’s total exposure to risk.
  • Market Risk: The Basel Committee’s framework is applied to assess market risk.

Capital Requirements

By end-2022, WAEMU banks had to meet a minimum common equity tier 1 capital ratio of 7.5% and a minimum total capital ratio of 11.5%, both inclusive of a 2.5% capital conservation buffer. The key highlights are:

  • Minimum Capital Requirements: By the end of 2022, WAEMU banks had to meet a minimum common equity tier 1 capital ratio of 7.5% and a minimum total capital ratio of 11.5%.
  • Capital Conservation Buffer: A capital conservation buffer has been introduced at a maximum level of 2.5% of the bank’s total exposure to risk.
  • Minimum Share Capital: The minimum share capital of credit institutions in the member states of the WAEMU is set at XOF10 billion for banks and XOF3 billion for financial institutions of a banking nature.

Insolvency, Recovery, and Resolution

The legal and regulatory framework governing insolvency procedures is governed by the OHADA Uniform Act on the Organization of Collective Procedures (the Uniform Act) and more specifically by the Law of 2008. The key highlights are:

  • Insolvency Procedures: Preventive settlement, judicial recovery, and liquidation of assets are three procedures for dealing with companies in difficulty.
  • Liquidation Proceedings: In the event of the opening or pronouncement of liquidation proceedings against a credit institution, the Banking Commission shall take a decision on the withdrawal of authorisation and the winding up of the institution.

Key Attributes of Effective Resolution Regimes

There is no evidence of implementation by the Senegalese government of the FSB Key Attributes of Effective Resolution Regimes.