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IMF says rapid growth of pan African banks may pose risks

Xinhua, February 5, 2015 Adjust font size:

The International Monetary Fund (IMF) said Thursday that the expansion of pan-African banks has posed some regulatory challenges that, if not addressed, may increase spillover risks.

IMF said in its report that expansion of cross-border banking in Africa in recent years is benefiting financial development but supervision of it is constrained in some countries.

An IMF report notes that pan-African banks have a systemic presence in around 36 countries and are now more important than the continent's long-established European and American banks.

According to the report, there has been a rapid expansion of pan-African banks (PABs) in recent years, with seven major PABs having a presence in at least ten African countries. Three of them are headquartered in Morocco, two in Togo, and one each in Nigeria and South Africa.

Additional banks, primarily from Kenya, Nigeria, and South Africa, have a regional presence with operations in at least five countries.

The PABs are now much more important in Africa than the long- established European and American banks, IMF said.

However, the report highlights that supervisory capacity is constrained and under-resourced in most of Africa, adding that although progress is being made in several areas, efforts to strengthen oversight in some cases need to be intensified.

The report said a renewed impetus for regional integration, coupled with the success of mobile payments in Kenya was propitious to the expansion of Kenyan banks in east Africa.

It said the rise of pan-African banks also opens new channels for transmission of macro-financial risks and other spillovers across home and host countries.

"As these groups develop in reach and complexity, significant supervision gaps, governance issues, and questions about cross- border resolution have emerged," the report said.

The expansion has created a network of systemically important banks, whose financial health in some cases is not fully known due to gaps in consolidated supervision, it added. Endi