The Bank of Mauritius has hosted the fourth meeting of the Financial Stability Board (FSB) regional consultative group for Sub-Saharan Africa in the island’s capital of Port Louis.
At the meeting, members reviewed the FSB’s policy priorities and work plan, including the Basel III capital adequacy regime, efforts to end the ‘too-big-to-fail’ doctrine that has governed state bail-outs of major banks in distress, increasing supervisory effectiveness, enhancing cross-border cooperation, transforming shadow banking and making derivatives markets safer.
Members also discussed vulnerabilities in the global financial system and regional financial stability issues. In this context, they considered the possibility of continued weak growth prospects in advanced economies, especially in Europe and a decline in investment in major economies in the region. They also considered the potential effects for the region of the future unwinding of accommodative monetary policies elsewhere.
The meeting went on to discuss three specific financial sector issues, the first of which was shadow banking in Sub-Saharan Africa. On this, members discussed the principal forms of shadow banking in the region and steps that are being taken to strengthen the oversight and regulation of the shadow banking system. The second topic was the development and use of credit ratings agencies (CRAs) and credit ratings. Discussions centred on efforts that are being undertaken in the region to develop credit rating agencies and the challenges this poses for regulators’ capacity to oversee the agencies. Members also acknowledged the risks associated with a mechanistic reliance on credit ratings.
Members discussed the foundations of effective risk management: risk governance, risk appetite frameworks and risk culture. Members debated the sound risk governance practices that should be expected from the region’s financial institutions (FIs) and what areas need to be strengthened. In addition, they considered the extent to which FIs from the region have risk appetite frameworks. Finally, members agreed to organise a workshop on effective resolution regimes for FIs, involving relevant stakeholders within the region.
The FSB regional consultative group for Sub-Saharan Africa is co-chaired by Lesetja Kganyago, deputy governor, South African Reserve Bank and Rundheersing Bheenick, governor, Bank of Mauritius. Members include financial authorities from Angola, Botswana, Ghana, Kenya, Mauritius, Namibia, Nigeria, South Africa and Tanzania, as well as the Central Bank of West African States based in Senegal. Permanent observers include the Committee of Central Bank Governors of the Southern African Development Community, and the East African Community.
Forecasts for 2016-2020 place Africa as the second fastest growing region in the world (at a compound annual growth rate (CAGR) of 4.3%), just below Emerging Asia.
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