Financial Sector Development in Africa: Opportunities ... - World Bank

158 Fuchs, Losse-Mueller, and Witte
levels make banking more expensive, reduce the volume of credit, and
hamper the mobilization of domestic resources for productive
investment.
Strengthening Banking Supervision
Strengthening supervisory capacity needs to be at the core of the reform
agenda going forward. A survey by Gottschalk and Griffith-Jones (2010)
carried out in Botswana, Ethiopia, Ghana, Kenya, Lesotho, Tanzania,
Uganda, and Zambia points out that the lack of skills, technical capacities,
and staff constitutes the major challenge in moving toward more complex
capital regimes in Sub-Saharan Africa.
An assessment of compliance with the Basel Core Principles by Fuchs,
Hands, and Jaeggi (2010) substantiates that view. The Basel Core Principles
for Effective Banking Supervision (BCPs) define minimum standards for
the way that banking supervision is organized and implemented by regulatory
authorities. On average, the 16 African jurisdictions where BCPs have
been assessed were largely or fully compliant with only 20 out of 30
principles. 1 Among the principles that pose challenges in compliance are
important ones such as BCP 1.2 (Independence, accountability, and transparency);
BCP 7 (Risk management process); BCP 18 (Abuse of financial
services); and BCP 23 (Corrective and remedial powers of supervisors)
with median ratings being materially noncompliant (see figure 5.3).
Figure 5.3 Compliance with Basel Core Principles (BCPs): Median Assessment
Results, 16 African Low-Income Countries
Grade of compliance
Compliant
Largely
compliant
Materially
noncompliant
Noncompliant
Licensing criteria
1.1
1.21.31.41.51.6
2
3
4
5
6
7
8
910111213141516171819202122232425
BCP number
Supervisory reporting
Consolidated supervision
Home-host
BCPs Median of assessment results
Source: Fuchs, Hands, and Jaeggi 2010.