Banking Supervision and Regulation
African countries have made considerable progress in reforming banking regulations and their supervisory processes in the past two decades. The African financial sector is becoming more integrated with global markets, innovation is leading to the adoption of more sophisticated financial products, and the importance of non-bank financial services is increasing. These improvements contributed to the resilience of African banking systems during the global financial crisis and led to higher capital ratios, stronger profitability, and higher liquidity among African banks. The far reaching reforms have created a conducive environment for expanding access to banking and non-bank financial services. However the deepening of the banking sector in Africa also comes with additional risks emanating from new product and service offerings, more complex financial markets, regional financial sector integration and deeper links with global financial markets. Indeed, Banks are therefore likely to be subject to more volatile capital flows, heightened credit risk, and liquidity risk.