Organisation of the banking and financial system

Banks are the privileged partners of the Central Bank and the main media for the implementation of its monetary policy. In its capacity as Central Bank and Monetary Authority, the Central Bank of West African States (BCEAO) maintains diversified relations with the banks and financial establishments conducting activities in the member States of the West African Monetary Union (WAMU).

These relations mainly fall within the scope of the functions performed by BCEAO as far as the supervision of the banking sector and the control and distribution of credit are concerned.

Composition of the WAMU banking system

As of June 30, 1998, the Union comprises 59 banks and 28 financial establishments. Eight groups dominate the WAMU banking system through 25 establishments with relatively wide national networks.
They are:

• the affiliated branches of the "Société Générale", based in Senegal and Côte d'Ivoire ;
• the partners of the Banque Nationale de Paris (BNP), based in Burkina, Côte d'Ivoire, Mali, Senegal and Togo ;
• the branches of the "Crédit Lyonnais", established in Benin, Côte d'Ivoire, Mali and Senegal ;
• the branches of Citibank-NA, based in Côte d'Ivoire and Senegal ;
• the banks of the group Bank of Africa (BOA), established in Benin, Burkina Faso, Côte d'Ivoire, Mali and Niger ;
• the Ecobank group, which has four entities in Benin, Burkina, Côte d'Ivoire, Mali and Togo;
• the banks created in partnership with Lybia, in Burkina, Mali, Niger and Togo ;
• and affiliated bank of the Financial B.C. group in Benin.

Banking legislation

Banking supervision is exerted on the basis of laws which are applicable throughout the Union. As a matter of fact, the solidarity existing between the member States of the Union is materialised, as far as the banking system is concerned, by the adoption of a common law which is inserted into the legal system of each State. This law which is commonly referred to as Banking Law entered into force on 1st October 1990.

The Banking Law provides for an exact definition of banks and financial institutions, and of the credit and investment activities conducted by the latter. It specifies the conditions of entry and of exercise of the banking profession, and determines the obligations which must be met by banks and financial institutions in the execution of their operations. The Banking Law defines the scope of the control exerted by the Central Bank and the Banking Commission, and spells out the rules governing the Monetary Union and the sanctions applicable in case these rules are not respected.

Banks and financial institutions must be authorised and registered on the list of banks and financial institutions to be able to operate. This authorisation is granted by the Minister of Finance after BCEAO has examined the application and the WAMU Banking Commission has certified its conformity with applicable laws.

The conditions of approval are mainly based on:

• the name;
• the legal status of the establishment ;
• the minimum capital which stands at 1 billion for banks throughout the States, whereas that of financial institutions is 300 million in Côte d'Ivoire and Senegal, and 100 million in the other States;
• the adequacy between the resources and objectives of the establishment to be created;
• the quality of shareholders ;
• the worthiness and experience of managers;
• an activity programme showing the viability of the operation.

As far as activities are concerned, despite the fact that they are becoming more and more commonplace, banks and financial institutions operating in the Union are not authorised to conduct purely commercial, industrial, agricultural and service activities. Other operations are subject to restrictions.

In order to enable all banks and financial institutions of the Union to have access to the banking market of each member State, in optimal competition conditions, the Council of Ministers of the Union decided, at its meeting held on 3rd July 1997, to adopt the principle of unique approval. Thus, as from 1st January 1999, any bank or financial institution duly authorised by a State of the Union, may carry out a banking or financial activity in the other States of the Union, and provide services of the same nature in any other area in the Union, without having to request new authorizations.

In addition to the Banking Law, the other legal texts which strengthen banking supervision are the following ones:

• the new prudential rules, which entered into force on 1st October 1991. They cover all the rules applicable to banks and financial institutions and pertaining to the conditions of exercise of the profession, accounting regulations, the regulations governing credit establishments operations, and management standards ;
• the decree relating to the classification, legal status and operations of financial institutions, which entered into force in 1992 ;
• the framework law defining and repressing usury, which has already been adopted by several member States or which is being adopted by the others for its ratification.

Regulation and control of credit establishments

The main duties entrusted to the Central Bank in the framework of the general rules governing the exercise of the banking profession and related activities are the following:

• examination of requests for authorisation;
• powers to exert off-site and on-site control;
• determination of effective equity;
• dispensation from banking conditions;
• financial sanctions;
• definition of the modalities for the implementation of the decisions taken by the Council of Ministers in the framework of its competences;
• accounting provisions applicable to banks and financial institutions;
• definition of banking conditions;
• determination of credit ceilings for banks staff and managers 
• determination of the amount of the special reserve.

Assistance of the Central Bank to credit establishments

In compliance with its statutes, the Central Bank grants assistance to the banks and financial institutions which are authorised to conduct activities in the States of the West African Monetary Union.
In that respect, it may :

• make advances against publics securities issued or guaranteed by the States of the Union ;
• discount, purchase, sell , accept "en pension" or take in pledge claims on the States of the Union, enterprises and private persons.

Other interventions of the Central Bank in favour of credit establishments

The other interventions of the Central Bank in favour of the banking system are mainly focused on the following operations:

• organisation of the money market ;
• participation in the capital of establishments or organisations whose activities are of general interest to one or several States of the Union ;
• opening in its books of accounts on behalf of banks and financial institutions ;
• execution of transfers on behalf of credit establishments ;
• centralisation of payment incidents reported by credit establishments ;
• organisation et gestion des chambres de compensation du système bancaire ;
• transmission by all credit establishments of all documents and information which are relevant for the performance of the duties assigned to the Central Bank ;
• teaching of banking techniques and training of the staff of administrations, banks and financial institutions.

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Central Banks of West African States / Banque Centrale des Etats de l’Afrique de l’Ouest