BEAC creates COBAC to regulate CEMAC banking

• The Central African States signed a convention creating the Commission Bancaire de l'Afrique Centrale (COBAC) on October 16, 1990.
• The COBAC is tasked with ensuring compliance with legislative and regulatory provisions applicable to credit institutions and sanctioning any breaches.
• The COBAC has diverse powers and competences in regulating and organizing banking activity, including setting standards for financial institution management.
• Lawyers advising clients operating in CEMAC should be aware of the COBAC's new powers and competences, which may impact their compliance obligations and risk management strategies.

The COBAC is tasked with ensuring compliance with legislative and regulatory provisions applicable to credit institutions and sanctioning any breaches.

The Central African States recognized the need to control banking activity early on and engaged in harmonizing their policies related to banking practice, financial institution control, credit distribution, and control. The Bank of Central African States (BEAC) was entrusted with broad competences in this domain. However, a system of control based solely on document review proved limited, leading the BEAC to establish a Cellule de Contrôle des Banques in 1979. This cell had a purely technical role, and states retained full control over their banking systems. The initiative for on-site investigations remained with public authorities, as did the opening of disciplinary procedures.

In the second half of the 1980s, banks in the region faced serious difficulties due to unfavorable economic conditions and poor management. This led to a restructuring of banking systems and a reform of the surveillance system for financial institutions. In response, the Central African States signed the Convention creating the Commission Bancaire de l'Afrique Centrale (COBAC) on October 16, 1990. The COBAC was tasked with ensuring compliance with legislative and regulatory provisions applicable to credit institutions and sanctioning any breaches.

The same states signed a convention on January 17, 1992, harmonizing banking regulations in the Central African region. The COBAC, officially established on January 22, 1993, is headed by the BEAC Governor, assisted by a Vice-Governor. A General Secretariat, led by a Secretary-General and an Assistant Secretary-General, ensures administrative continuity.

The creation of the COBAC was preceded by the Convention of November 22, 1972, which aimed to harmonize policies related to banking practice, financial institution control, credit distribution, and control. The BEAC was entrusted with broad competences in this domain. However, a system of control based solely on document review proved limited, leading to the establishment of the Cellule de Contrôle des Banques in 1979.

The COBAC's powers and competences are outlined in Article 14 of the Convention creating it. The COBAC is responsible for ensuring compliance with legislative and regulatory provisions applicable to credit institutions and sanctioning any breaches. It also has the power to regulate and organize banking activity, including setting standards for financial institution management.

The COBAC's competences are diverse and include the power to issue regulations, supervise financial institutions, and ensure the stability of the financial system.

The creation of the COBAC marks a significant development in banking regulation in the Central African region. The COBAC's powers and competences are designed to ensure compliance with legislative and regulatory provisions applicable to credit institutions and sanctioning any breaches.

Lawyers advising clients operating in CEMAC should be aware of the COBAC's new powers and competences, which may impact their compliance obligations and risk management strategies. The COBAC's ability to regulate and organize banking activity will also have implications for financial institutions operating in the region.

The COBAC's creation is a response to the serious difficulties faced by banks in the region due to unfavorable economic conditions and poor management. The reform of the surveillance system for financial institutions and the restructuring of banking systems are key aspects of the COBAC's mandate.

Lawyers advising clients operating in CEMAC should be aware of the COBAC's new powers and competences, which may impact their compliance obligations and risk management strategies.

Source: Original reporting via Supervision bancaire