Financial Crime World

WAEMU Council of Ministers Adopts Prudential System for Banking Sector

Dakar, Senegal - The West African Economic and Monetary Union (WAEMU) Council of Ministers has adopted a prudential system for the banking sector to ensure the stability and soundness of credit institutions in the region.

Key Features of the Prudential System

Conditions for Exercising the Profession

  • Minimum capital requirements
  • Special reserve regulations
  • Accounting standards
  • Risk coverage by effective equity capital

Regulation of Specific Operations

  • Operational risk integration into supervisory process
  • Two approaches to evaluating operational risks based on weightings applied to an institution’s Net Banking Income
  • Definition of roles and responsibilities for operational risk management function
  • Reinforcement of core capital under Pillar 1 requirements

Management Standards

  • Integration of credit risk assessment with counterparty weightings set by the French banking commission, ACPR (Autorité de contrôle prudentiel et de résolution)
  • Introduction of a conservation buffer established at a maximum level of 2.5% of the bank’s total exposure to risk
  • Minimum common equity tier 1 capital ratio of 7.5% and minimum total capital ratio of 11.5%, both inclusive of a 2.5% capital conservation buffer, by end-2022

Insolvency, Recovery and Resolution Framework

  • OHADA Uniform Act on the Organization of Collective Procedures
  • Law of 2008 governing insolvency, recovery and resolution of banks in Senegal

Procedures for Dealing with Companies in Difficulty

  • Preventive settlement
  • Judicial recovery
  • Liquidation of assets

Resolution Regimes

  • FSB Key Attributes of Effective Resolution Regimes not implemented by the Senegalese government
  • Collective procedures may be imposed on creditors of a company in difficulty
  • Bank account holders to be reimbursed immediately after creditors’ claims are settled

Conclusion

The adoption of the prudential system is expected to strengthen the stability and soundness of credit institutions in WAEMU, ensuring the best possible payment of creditors’ claims.