EFECTOS O CONSECUENCIAS DE LA POCA IMPORTANCIA QUE LE DAN LOS DOCENTES A LAS REGLAS ORTOGRÁFICAS.
ESCUCHAR Y HABLAR:
It is submitted that the era of ‘financial liberalisation’281 which was marked by deregulation was aimed at introducing competition within the banking industry282. This resulted in yet another departure from the original purpose of bank regulations as banks had started to become less profitable due to increased competition283. Financial liberalisation thus called into question the very reason for which banking regulation was first introduced.
The deregulation within the banking industries of a number of jurisdictions and the relaxation of restrictions on the establishment of foreign banking subsidiaries within these jurisdictions, paved the way for the onset of financial globalisation284. The resulting effect, such as ever-increasing banking transactions, cross-border mergers and acquisitions and a growing number of bilateral and multilateral foreign investment agreements being entered into by countries and financial institutions (particularly banks) has resulted in a global explosion of inter-bank activities285. In some instances where mergers and acquisitions have resulted in large financial conglomerate structures, it has often been followed by an amplification of the threat of all types of banking risks which would have previously been limited to the individual balance sheets286 of banks. It is submitted therefore that today, as a result of financial globalisation and banking deregulation, the transmission of systemic risk through financial contagion has become a real threat to both national and international financial stability.
280 In a publication by Clifford Chance LLP, ‘Basel 3: Relaxations to the Liquidity Coverage Ratio’ 2013, it was suggested that the BCBS’ finalised details on the Liquidity Coverage Ratio (LCR) was not as onerous as the earlier version published in December 2010.
281 Andrew Crockett, ‘Why is Financial Stability a Goal of Public Policy?’. A Paper presented at a Symposium with the theme Maintaining Financial Stability in a Global Economy p18 August 28-30 1997.
282 ibid. 283
ibid.
284 Mark Swinburne, ‘The Globalisation of Financial Institutions and its implication for financial stability’ 2007, Ch III, IMF Global Financial Stability Report, 98.
285 ibid. 286
Further to this view, an IMF Global Financial Stability Report287 published in April 2007 acknowledged that financial institutions had entered an era of institutional globalisation which had serious implications for financial stability288. The Report added further that although globalisation of financial institutions had improved financial stability generally, there was some level of uncertainty as to whether globalisation enabled ‘financial systems to withstand extreme events’289. On the issue of whether globalisation made financial systems capable of withstanding extreme events, it is submitted that the ability of financial systems on both a national level and an international level to withstand extreme events, would be dependent on the inter-linkages of the different banks within that financial system, the sizes of those banks involved and the nature and extent to which credit derivatives are dealt in, on national and cross-border level.
Although the ability of a bank to withstand extreme events is crucial to financial stability, the lack of an effective cross-border bank insolvency resolution procedure implies that when banks fail, local and international bank customers including stakeholders and other institutions that have a vested interest in the failing/failed financial institution may not have any realistic chance of getting their money or investment back.
Also, the intricate nature of the links and relationships that exist between and amongst banks points to the fact that any form of financial crisis could result in a potential conflict between national banking authorities on the issue of bank insolvency resolution. If this occurs, this could go on for years and could be very costly.
The era of financial liberalisation that swept through Europe and other industrialised western countries eventually found its way through the African continent. Inutu Lukonga and Kay Chung290, suggest that cross-border expansion of banks of Sub-Saharan African (SSA) origin is an ongoing
287
IMF Global Financial Stability Report 2007, 98. 288
Swinburne (n284) 98. 289
Where extreme events could be interpreted as severe shocks to the financial system capable of causing a financial crisis.
290 Inutu Lukonga and Kay Chung, ‘The Cross-Border Expansion of African LCFIs – Implications for Regional Financial Stability and Regulatory Reform’ 2010 IMF Research Paper.
phenomenon and by the end of 2009, there were 18 Sub-Saharan banks that had a presence in four or more countries. Such is the rate of expansion that they even suggest that banks of SSA origin have now attained a global presence as well.
3.5.1 Pan-African Banks
Pan-African Banks have been defined as ‘Banking groups domiciled in Africa with subsidiaries in several countries’291. According to Benedicte Vibe Christensen, their expansion across the African continent may be attributed to the relaxation of investment regulations by certain host countries that previously barred foreign banks from opening subsidiaries within their jurisdictions. It has also been suggested292 that the ever-increasing financial integration within the various financial markets in the Sub-Saharan African region has been mainly due to the expansion of the Pan-African Banking groups.
Although most of the Pan-African banking groups are headquartered in South Africa, Nigeria and Morocco, other Pan-African banking groups exist that have their head-office in other countries such as Togo. In Ghana, Ecobank293 and Bank of Africa are typical examples of the presence of Pan-African banks, whereas in Kenya, the Kenya Commercial Bank, Equity Bank and the Commercial Bank of Africa represent a few of the Pan-African Banks originating from Kenya.
It is submitted that the expansion of Pan-African Banking within Sub-Saharan Africa has both positive and negative implications for the African continent. Although Pan-African banks294 introduce competition295 within the local banking systems of the host countries they reside in, as well as technical expertise and possibly improved IT systems and infrastructure, their presence in any jurisdiction is a potential source of systemic risk for the host country and the wider financial stability of the African Continent at large.
291 B V Christensen, ‘Financial Integration in Africa: Implications for monetary policy and financial stability’, (2014) BIS Paper 76 11, 16. (Accessed electronically in April 2014).
292 ibid. 293
Ecobank has a presence in 32 countries and is headquartered in Togo. 294
Most Pan-African banks accept local currency deposits in the jurisdictions they reside in, thus acting like domestic banks. They also tend to deal in foreign currency – IMF (2012d). 295
Although Inutu Lukonga and Kay Chung, find in their paper, that the expansion of large conglomerate financial institutions (LCFIs) e.g. Pan-African Banks poses no immediate threat to the financial stability of the African region, they agree that such a potential threat still remains especially where there is no harmonisation in the banking regulatory practices of the home and host jurisdictions of these LCFIs.
They add that the source of such potential threat may be traced to the lack of ‘consolidated and cross-border supervision’, which leads to a lack of harmony in the banking regulatory standards of both home and host country and the lack of a cross-border banking insolvency framework and until these ‘deficiencies’ are addressed, the threat of financial stability posed by LCFIs will still remain
3.5.2 Regional harmonisation of banking regulations
The importance of an African regional banking regulatory framework cannot be overstated enough, not least because of the presence of foreign banks within the African continent, a significant number of which are of Pan-African origin.
Hence, it is submitted that the need for such a framework is underscored by the increase in the presence of Pan-African banks within African countries and also the ever-increasing volume of transactions and cross-border dealings between and amongst countries in Africa.
It is further submitted that increased cross-border transactions has a significant impact on African banks in that it increases the threat to regional financial stability through contagion. Thus not only will regional harmonisation of banking regulation significantly reduce the risk of banking crisis through cross-border contagion, but it would increase the variety and efficiency of banking and financial services which would ultimately be beneficial for competition within the banking industry.
The East African Community (EAC) consisting of Kenya, Rwanda, Burundi, Tanzania and Uganda have already begun the consultation process aimed at harmonising their banking and finance regulatory framework whereas members of the West African Monetary Zone (WAMZ) consisting of Ghana,
Gambia, Guinea, Nigeria and Sierra Leone have also begun similar and parallel attempts to harmonise their banking regulations and supervision. Notwithstanding these efforts296 by African countries, there is still lack of progress after more than a decade of negotiations, a situation which may arguably be due to lack of co-operation between the relevant institutions or possibly a lack of political will to carry these ground-breaking reforms through. 3.5.3 Global harmonisation of banking regulations
While the case for harmonisation in banking regulations has arguably been established, not least following the prolific expansion of Pan-African banks, the African continent is still yet to devise a banking regulatory framework which recognises or takes into account the slow pace in the development of individual financial systems of African countries297.
Whilst the African continent still awaits such an ‘African-designed’ banking regulatory framework, the ever-increasing cross-border integration of financial institutions from Emerging countries like China with financial institutions in Africa is increasingly becoming difficult to ignore298.
Also, notwithstanding the continued presence in African countries of the subsidiaries of global banks domiciled in countries such as the United Kingdom299 and France300, Emerging countries such as China have in recent times been expanding their financial institutions in Africa301. Other evidence of increasing co-operation between Chinese and African banks, include an Agreement signed in 2009 by China and Ecobank to increase co-operation and a Memorandum of Understanding signed in 2008 between China Development Bank and the United Bank of Africa to provide finance for long-
296
For a more detailed account of efforts being made by African countries towards monetary union, economic integration and banking regulation and supervision harmonisation, see I Salami, ‘Banking harmonisation in the African context’, (2008) Journal of Banking Regulation Volume 9(3), 187.
297 ibid. Perhaps with the exception of South Africa – An Emerging African country. 298
Lukonga and Chung (n290). 299
Barclays bank and Standard Chartered Bank. 300
Société Généralé bank in France.
301 B V Christensen, ‘Financial Integration in Africa: Implications for Monetary Policy and Financial Stability’ 2014, BIS Papers No 76 11-15. In 2007, the Industrial and Commercial Bank of China invested $5.5 billion in the Standard Bank of South Africa to cater for Chinese customers and interests within the African region.
term projects aimed at improving the infrastructure within the African continent302.