The regulation on credit institutions is standardized by a law regulating banking in the WAEMU zone[1].
This new banking law, which entered into force in April 2010, makes a distinction between banks and banking financial institutions, but gives them a common name: “credit institutions”.
Article 4 of this new banking law on credit institutions specifies that banking financial institutions are authorized to carry out the banking operations for which they are authorized.
They are classified, by instruction of the Central Bank, in various categories according to the nature of the bank operations that they are authorized to carry out. For greater certainty, section 6 considers credit transactions for the purposes of this Act to be “any act by which a person, acting for valuable consideration:
Makes or promises to make funds available to someone; takes, in the interest of the latter, a signature undertaking such as an endorsement, a bond or a guarantee. Are treated as credit operations, leasing and, in general, any lease transaction with an option to purchase. “
Article 56 of the Framework Law provides, inter alia, that the WAMU Council of Ministers is empowered to make all provisions concerning:
1) the respect by credit institutions of a relationship between the various elements of their resources and uses or the respect of ceilings or minimums for the amount of some of their uses ;
2) the conditions under which credit institutions may take participations ;
(3) the management standards that credit institutions must meet in order, in particular, to ensure their liquidity, solvency, the division of their risks and the balance of their financial structure.
In addition, Article 59 provides that “Credit institutions may not oppose the controls carried out by the Banking Commission and the Central Bank in accordance with the provisions in force in the territory of (). “
It is clear that the framework law regulating the banking activity in the WAEMU zone itself lays the foundations for the control that should be exercised by the various institutions and bodies (Council of Ministers, BCEAO, Banking Commission, Ministers of Finance) on the institutions in the Union space, basically because of its importance in the growth and stability of the subregional economy.
Added to this is a major fact linked to an increasingly strict international regulation of banking activity and in particular credit policies. This situation stems directly from the 2008 financial crisis, the origin of which was an imprudent and uncontrolled credit policy that jeopardized deposits received from third parties by banks. In all the countries affected by the financial crisis, the states have been forced to play their sovereign role of guarantor of last resort.
Indeed, the weakness of our economies calls for more caution because a cure in such circumstances would be highly more destructive to the economic fabric here than it has been elsewhere.
It is in this context that the entry into force on 1 January 2018 of a new prudential regulation resulting from the transposition of Basel II and Basel III standards[2]. This new situation calls for a change in the banks’ approach to strengthening the financial system and the soundness of credit institutions.
Indeed, these last rules, which come in addition to those previously practiced by the supervisory authority namely the BCEAO, concern:
- Solvency that is credit risk, market risk, operational risk;
- The monitoring system that each bank must implement to monitor risks and to know at all times its exposure and its position with regard to capital ;
- And finally, a market discipline, by requiring banks to communicate financial information.
- Bank stress tests or stress tests, which assess the capacity of a credit institution or banking system to cope with severe shocks, simulated through extreme scenarios that may occur. The BCEAO is also assessing the resilience of the banking sector through the implementation of this tool[4].
- the safety and soundness of the taxable person is threatened by these activities, which expose him to excessive risk or are not properly managed;
- the control exercised by other supervisory authorities is not satisfactory considering the risks involved;
- it is prevented from exercising effective control on a consolidated basis.