ABOUT THE FORUM
Africa has been the fastest growing continent over the past decade, attracting a record level of foreign direct investment. Retail banks operating on the continent have contributed to and benefited from this growth dynamic. Notably, although the profitability of the global banking industry has continued to languish, the banking sector in Africa has shown impressive returns with profitability nearly twice as high as the global average. In order to thrive, banks in Africa (and elsewhere) need to continue to improve risk management practices, governance structures, and compliance functions, and to embrace digital technology. Africa's financial institutions and regulators have sought to address these challenges through legislative and administrative measures to mitigate the perceived risks in critical areas, such as anti-money laundering. But they cannot address these problems alone – it requires a coordinated approach with international counterparts.
As a result of greater integration of African economies and banking systems with the wider international financial system, some of the regulatory pressures felt by international banks following the 2008/9 global financial crisis have also been felt on the African continent. According to experts, there has been a 25% fall in global correspondent banking relationships in the last decade, largely the result of the retreat by U.S. and European banks. Although there is a growing demand for banking services in Africa, local banks are experiencing the unintended consequences of the tightening of global financial sector regulations. In particular, restricted access to the international financial system through correspondent banking relationships has resulted in higher transaction costs for financial flows from other regions.
In addition to their functions in credit transmission, savings and payment systems, banks are important agents in trade finance and capital flows. In particular, the role of banks as agents in the implementation of foreign exchange regulations has come under increased scrutiny in some countries in Africa. Such regulations affect the availability of foreign exchange for the import of goods and repatriation of profits and dividends from inward investment as well as the terms of capital flight. While the trend over the last 50 years has been towards a liberalization of foreign exchange regulation in Africa (and elsewhere), there has recently been some tightening of such regulations either for prudential reasons or to conserve foreign exchange evident in some notable cases on the continent. Foreign investors have sought greater clarity on these issues to inform their investment decisions.
Corporate Council on Africa is convening U.S. and African financial institutions, government representatives and regulators to identify regulatory and market practices needed to support the greater integration of Africa's banking systems with the international financial system. Panels will address the following:
● How is the reduction of correspondent banking affecting transaction costs and the availability of foreign exchange in African trade and investment deals?
● How are financial institutions and regulators addressing the gaps in their compliance processes? What is the role of technology in tackling these issues?
● What are the risks to the global financial system arising from Africa's relatively limited integration into the international financial system?
● In the face of these challenges, are there potential opportunities for Africa's local and regional bank and non-bank financial institutions?
● How are U.S. regulators and multilateral agencies collaborating with African regulators and banks?
● Case study of how increased compliance can strengthen correspondent banking relationships. What are the lessons learned and best practices?
General Counsel and Director, Legal Department of International Monetary Fund
Founder and Managing Partner of Potomac Group
Co-Chair Africa & MENA Practice at Manatt, Phelps & Phillips, LLC
Presidential Special Investment Envoy at Republic of South Africa
CEO of Global Agricultural Exchange (GAEX)
Counsel at Orrick, Herrington & Sutcliffe
Head of Licensing and Exchange Control at Bank of Mozambique
Co Chair, Financial Services Group at Covington and Burling
Covington & Burling LLP
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