COMMISSION BANCAIRE OF CENTRAL AFRICA

COBAC Instruction I-2018/01 establishing the evaluation methodology for the identification criteria of systemically important institutions in the Economic and Monetary Community of Central Africa (CEMAC)

The President of the Commission Bancaire of Central Africa,

Having regard to the Convention of 16 October 1990 establishing a Commission Bancaire of Central Africa and its Annex;

Having regard to the Convention of 17 January 1992 on harmonizing banking regulation in the States of Central Africa and its Annex;

Having regard to Regulation No. 02/14/CEMAC/UMAC/COBAC on the handling of credit institutions in difficulty in CEMAC;

Having regard to COBAC Regulation R-2018/03 on the identification and supervision of systemically important institutions in the Economic and Monetary Community of Central Africa (CEMAC);

DECIDES:

Article 1- This Instruction applies to credit institutions in CEMAC.

Article 2- In accordance with COBAC Regulation R-2018/03 on the identification and supervision of systemically important institutions in the Economic and Monetary Community of Central Africa (CEMAC), systemically important institutions are identified based on five criteria: their size, the interdependence of their activities, the absence of direct substitutes or financial infrastructure for their service provision, their activities at the sub-regional, regional, or global level, and their complexity.

Each of these criteria is evaluated based on the indicators presented in this Instruction.

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Article 3- Size is evaluated based on the total assets of the balance sheet.

Article 4- Interdependence is evaluated based on two indicators: exposures to the financial sector and liabilities vis-à-vis the financial sector.

Exposures to the financial sector include cash and interbank operations accounts shown on the asset side of the balance sheet.

Liabilities vis-à-vis the financial sector include cash and interbank operations accounts shown on the liability side of the balance sheet.

Article 5- The absence of direct substitutes is evaluated based on payment flows passing through payment systems.

Payment flows passing through payment systems refer to operations conducted via payment and settlement systems.

Article 6- Complexity is evaluated based on two indicators: securities held for trading and available-for-sale, and off-balance sheet items.

Securities held for trading and available-for-sale are trading and investment securities.

Off-balance sheet items are the amount of forward foreign exchange operations, receivable or payable deferred/forward transactions, and securities to be received or delivered on the gray market.

Article 7- Cross-border activities are evaluated based on two indicators: cross-border claims and cross-border liabilities.

Cross-border claims are those held by the institution against non-CEMAC resident counterparties.

Cross-border liabilities are debts borne by the institution against non-CEMAC resident entities.

Article 8- For determining the systemic importance of subject institutions at the CEMAC level, the Commission Bancaire applies the following weights for each criterion and indicator:

Criteria	Indicators	Weighting
Size	Total balance sheet	45%
Interconnectedness	Exposure to the financial sector	20%
	Liabilities vis-à-vis the financial sector	10%
Complexity	Trading and investment securities	10%
	Forward foreign exchange operations, receivable/payable deferred/forward transactions, and securities to be received/delivered on the gray market	15%
Substitutability	Payment flows through payment systems	7.5%
Cross-border activities	Cross-border claims	7.5%
	Cross-border liabilities	5%
		15%
		7.5%
		7.5%

Article 9- The Commission Bancaire assigns each institution a score for each criterion and indicator, taking into account their relative weight in the banking system.

The obtained scores are then weighted and cumulative to obtain the final score indicating the level of systemic importance.

Article 10- Systemic importance is established based on data collected by the COBAC General Secretariat over the last six months.

Accordingly, an institution is of systemic importance:

• high, when the cumulative total of scores is greater than 900;
• medium, when the cumulative total of scores is greater than 600 and less than or equal to 900;
• low, when the cumulative total of scores is greater than 300 and less than or equal to 600.

An institution has no systemic importance when the cumulative total of scores is less than or equal to 300.

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An institution is classified into a category when the cumulative total of scores is successively within the same threshold interval during the six months considered for determining systemic importance. Otherwise, it is downgraded to the lower category.

Article 11- The Secretary General proposes to the Commission Bancaire, for adoption, the list of systemically important credit institutions once a year.

Article 12- To account for the evolution of the macroeconomic environment and the situation of the CEMAC banking system, the COBAC General Secretariat reviews every two (2) years and as often as necessary the criteria and indicators for determining the systemic importance of subject institutions, and proposes, where applicable, the necessary modifications to the Commission Bancaire.

Article 13- This Instruction enters into force as of September 1, 2018.

Article 14- The COBAC Secretary General is responsible for implementing this Regulation and notifying it to the national monetary authorities, the National Directorates of the Bank of Central African States, the Central African Stability Committee, the professional associations of credit institutions, and the professional associations of microfinance institutions.

Done at Libreville, on May 12, 2018.

For the Commission Bancaire of Central Africa,

The President,
ABBAS MAHAMAT TOLLI