Global banking regulatory reforms to affect Africa - CNBC Africa

Global banking regulatory reforms to affect Africa

Special Report

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Kenyans outside a Barclays Bank branch in Nairobi. Barclays is one of many international banks in Africa.

“Ever since the sub-prime crisis, banks have been under pressure to review their regulatory regime, and this has extended far beyond just the normal KYC and AML. There’s been quite a bit of focus on how the consumer is treated in the US and the UK, particularly in terms of transparency regarding pricing,” Rand Merchant Bank director of Banks and DFIs Suresh Chaytoo told CNBC Africa on Wednesday.

“As a result, there’s a number of regulations that are now coming out of the US and the EU, which would have an impact in terms of the African banking landscape. Second, banks are reviewing the type of business that they’ve been traditionally in. They’re starting to focus on their core businesses.”

Chaytoo added that banking regulators have begun significantly pressurising international banks to focus on more domestic franchises as opposed to their non-local ones.

International banks are also starting to review their banking business focus, and a number of international banks with branches in Africa are considering exiting the continent.

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“HSBC Egypt, for example, who have been in the country for a number of years, have decided to exit the SME business. This is one of the key focus areas of Egypt and possibly a focus area of a number for HSBC,” Chaytoo explained.

“I’m not too sure of the reasons for this exactly but it all points to banks revising their policy frameworks, they type of businesses that they are in, not only from a business strategy but also from a regulatory and compliance strategy. It’s becoming extremely expensive to maintain a large compliance framework.”

African banks have however already begun to invest a significant amount into infrastructure from a compliance perspective, and Chyatoo expects to see them investing a lot more into compliance and adhering to its international standards.

“Our South African Reserve Bank regulates that banks maintain, for example, enhanced due diligence on high risk countries. This is very intense work, it requires a lot of man hours in terms of KYC and AML. I expect a lot more African banks will need to comply in terms of going through the same process,” he said.

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