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

172 Fuchs, Losse-Mueller, and Witte
Recent reforms of the international supervisory architecture have
focused on the constitution of colleges of supervisors for all internationally
operating banks. The representation of African supervisors in these
supervisory colleges remains a weak point, given the current asymmetry
of the size of operations of large international banks between developed
markets and most African markets. Although the activities of an international
banking group in Africa may make up a very small part of its total
balance sheet, that bank may be of disproportionate importance for
certain African countries. The South African ABSA Group is a case in
point: though the group makes up only 2 percent of Barclay’s balance
sheet, it is the largest consumer bank in South Africa and systemically
important for the host country. This asymmetry introduces an inherent
complication in the design of college arrangements—namely, that
African supervisors have a large interest in being included in the supervisory
college, but may be overlooked by the home supervisors because
of a biased view of their significance for the efficiency and effectiveness
of the supervisory process. To these issues may be added the relative cost
to low-income country regulators of attending colleges in distant locations:
not only in terms of transport costs, but also in terms of time that
relatively scarce senior qualified personnel must spend away from the
home bank.
Closer to home, the emergence of regional banks headquartered in
African jurisdictions requires significant investments in regional cooperation
platforms and information exchange regimes across the region.
African home supervisors need to champion the establishment and effective
implementation of regional college agreements for the large regional
banks. Legal mechanisms, including bilateral memorandums of understanding,
to facilitate cooperation and information exchange need to be
put in place. Further, restrictions to information sharing relating to the
confidentiality of banking information need to be addressed to enable
regulators to pass on information to other regulators.
Crisis Response Mechanisms and Bank Resolution
Effective banking supervision and robust bank capitalization requirements
are important to minimize the likelihood of financial crises, but
these will not completely prevent episodes of banking distress and bank
failures. The difficulties experienced by governments in managing
bank failures during the financial crisis have demonstrated that effective
bank resolution is a weakness in developing and developed countries