Today, the South African Reserve Bank hosted the sixth meeting of the Financial Stability Board (FSB) Regional Consultative Group (RCG) for Sub-Saharan Africa in Cape Town, South Africa.
At the meeting, members of the FSB RCG for Sub-Saharan Africa began by reviewing the FSB’s work plan, including the completion of policy reforms in four priority areas. These are: building resilient financial institutions; ending too-big-to-fail; transforming shadow banking; and making derivatives markets safer. The Group then discussed vulnerabilities in the global financial system, regional financial stability issues and possible policy responses. In this context, they considered uncertainties in the global growth outlook, the unwinding of accommodative monetary policies in advanced economies and their impact on Sub-Saharan Africa.
Members stressed the importance of financial inclusion and discussed how to align its objectives with those of financial stability and anti-money laundering measures. Limited access to financial services contributes to the use of informal channels, which are vulnerable to illicit cross-border flows. The Financial Action Task Force has stated that financial exclusion represents a real risk to achieving effective implementation of its Recommendations on anti-money laundering/countering the financing of terrorism.
Taking lessons from the global financial crisis, members discussed how to effectively deal with weak and problem banks. The Group reviewed the Basel Committee on Banking Supervision’s consultative paper on the issue[1] and discussed principles for dealing with weak banks, including the early identification of risks and the need for early intervention.
Finally, members discussed how banks should measure, aggregate and control their exposures to single counterparties or groups of connected counterparties across their books and operations. Weaknesses in this area have led to bank failures in the past and differences currently exist in prudential norms across jurisdictions. Members agreed that having consistent approaches and regulatory limits with respect to large exposures will contribute to stability of the financial system.[2]
The FSB RCG for Sub-Saharan Africa is co-chaired by Lesetja Kganyago, Deputy Governor, South African Reserve Bank and Rundheersing Bheenick, Governor, Bank of Mauritius. Membership includes financial authorities from Angola, Botswana, Ghana, Kenya, Mauritius, Namibia, Nigeria, South Africa and Tanzania, as well as the Central Bank of West African States (BCEAO) based in Senegal. Permanent observers include the Committee of Central Bank Governors of the Southern African Development Community, and the East African Community. The list of members of the Regional Consultative Group for Sub-Saharan Africa is available at: http://www.financialstabilityboard.org/about/rcgssa.pdf.
[1] See http://www.bis.org/publ/bcbs285.pdf.