COM/TCM/MF/VIII/2
Annex I
RECOMMENDED PRUDENTIAL INDICATORS FOR HARMONISED BANK
SUPERVISION AND REGULATION IN COMESA
PRUDENTIAL INDICATOR
Minimum Tier 1 ratio
Capital Adequacy
Asset classification
Asset provisioning:
Pass
Special mention
CURRENT STATUS IN
COMESA
Range 4% - 8%
4 countries 4%
3 countries 8%
3 countries 5%
3 countries no standard
Range: 6% - 12%
1 country 6%
5 countries 8%
4 countries 10%
2 countries 12%
2 countries no standard
Normal/pass
Pass/special mention
Substandard
Doubtful
Loss
4 countries provide 1%
1 country provides 2%
1 country provides 5%
6 countries don’t provide
2 countries provide 1%
2 countries provide 2%
1 country provide 25%
6 countries don’t provide
RECOMMENDED
STANDARD
5%
10%
Pass
Special mention
Substandard
Doubtful
Loss
1%’’’’
3%
Substandard
9 countries provide 20%
1 country provides 15%
1 country provide 50%
1 country don’t provide
20%
Doubtful
1 country provide 40%
9 countries provide 50%
2 countries provide 100%
50%
Loss
All countries provide 100%
100%
COM/TCM/MF/VIII/2
Annex I
Page 2
PRUDENTIAL INDICATOR
CURRENT STATUS IN
COMESA
RECOMMENDED
STANDARD
Single borrower limit
Range: 10% - 80% of capital
25% of capital
Limits on insider loans
Restricted to 20 - 25% of capital
in some countries. Such loans
are forbidden in others
25% of capital
Large exposure
Range: 5% - 30% of capital
At least 10% of
capital
Maximum limit on large exposures
Range: 0% - 800% of capital
800% of capital
Forex limits
Range: 5% - 25% of capital for
single currency and overall net
exposure
Aggregated 20%
of capital; & 10%
for single currency
ACTION PLAN: HARMONISATION OF BANKING SUPERVISION IN COMESA
AREAS OF
HARMONISATION
STANDARD
TIMING
Legal Framework

Start immediately,
Finalize by
31/12/03

Licensing




Review of legal standards
An initial minimum capital for fully
fledged clearing banks of US$1.5 million
31/12/04
Adoption of Basel guidelines on Cross 31/12/04
Border Investments (Principles 23 and
24)
Prescribe minimum content of a 31/12/04
business plan. Adopt common criteria for
licensing banks within the COMESA
Region
31/12/04
Implementation
of
the
common
licensing standards.
Fit and Proper Test
COM/TCM/MF/VIII/2
Annex 1
Page 3
Capital Adequacy

Adopt the Capital Accord (1988) and 31/12/04
Amendments for Market Risk.

Allocate capital for market risk
31/12/04

Minimum Capital ratios tier 1 capital of 5%
31/12/04

Minimum capital adequacy ratio of 10%
31/12/04
Compliance with 25 Core Submission of self assessments with regards 31/12/03 and
Principles for effective to compliance with 25 Core Principles for annually thereafter
Supervision
Effective Supervision to the COMESA
Secretariat
Accounting Standards and
Disclosure standards
Risk-focused Supervision
Off-Site Surveillance


Adoption of International accounting 31/12/04
standards that have a significant effect on
banks
31/12/04
Adoption of IAS 30 on minimum disclosure

Prescribe
content,
frequency
and
deadlines for minimum disclosure in 31/12/04
national regulations
31/12/04

Prior approval of accounts by regulators

Impose penalties and republish accounts 31/12/04
in the event of material errors and
misrepresentation

Adopt Risk-focused Supervision Concept
31/12/04

Adopt the CAMELS rating system
31/12/04

Adopt uniform classification of assets
31/12/04

Prescribe limits on credit and market risk
31/12/04

Enforce sound risk management systems 31/12/04
in banks

Prescribe good
practices

Establish common
standards

Adopt common standards on treatment of
collateral

Development of common indicators of
financial soundness in COMESA Region.
31/12/03

Develop common prudential returns and
stipulate frequency of submission of
31/12/04
corporate
asset
governance 31/12/04
provisioning
31/12/04
31/12/04
COM/TCM/MF/VIII/2
Annex I
Page 4
returns to national supervisory authorities
 Development and implementation of
Macro-prudential framework and returns
by each member country
Macro prudential Analysis
 Adopt
a
common
macro-prudential
framework and returns at regional level
31/12/2005
31/12/2005
 Training of member countries on macro- 31/12/2005
prudential analysis and stress testing

Development
of
framework
consolidated supervision

Develop guidelines on Memorandum of
Understanding to facilitate exchange of 31/12/04
information.
Implement quality assurance teams (for
each member country)
31/12/04
Consolidated Supervision

Quality Assurance

Problem Bank Resolution
Training of COMESA member countries 31/12/04
on quality assurance
Establishing of standards for efficient 31/12/04
resolution of problem banks (at national
level)
31/12/04
Harmonization of common standards for
efficient resolution of banks
31/12/04
Develop national procedures for closing
banking institutions



Internal
Audits
and
External
Training
of
Bank
Examiners/ Supervisors
Prescribe minimum auditing standards and 31/12/04
relationship with supervisors

Establishment
Committee
of
Laundering
training 31/12/04
COMESA
31/12/04

Development of Core Curriculum

Identification of Instructors and Trainers at
regional level
 Commencement of training
Examiners at COMESA
Anti-Money
Standards.
for 31/12/04

31/12/04
of
31/12/04
Bank
Develop and implement a legal 31/12/04
framework to control money laundering
COM/TCM/MF/VIII/2
Annex 1
Page 5
and financing of terrorist activities.



Each member should develop anti 31/12/04
money laundering guidelines for banks
in its jurisdiction.
ongoing
COMESA Bankers Association should
continue with its workshop on antimoney laundering.
ongoing
COMESA should continue conducting
Course on Financial Investigation.
Regulation
and
Supervision
of
Microfinance Institutions.
Establishment of appropriate regulatory 31/03/05
and Supervisory frameworks for Microfinance Institutions.
Financial Safety Nets

Establishment of appropriate safety nets 31/12/05
(deposit insurance) at country level.
Information
Systems

COMESA Secretariat
ESAF for IT solutions

Review of ESAF IT Project by COMESA 31/12/04
member countries

Adoption
by
COMESA
member
countries of the ESAF Harmonised IT 31/12/05
applications.
Technology
to
approach 31/10/03