In an apparent move to ensure a stable and efficient financial system in the banking sector, the Governor of the Central Bank Sheku Sambadeen Sesay last Thursday 7th July summoned the Managing Directors and their Chairmen of all thirteen commercial banks operating in the country to a special meeting to discuss a Financial Stability Analysis Report on the Financial Sector.
According to a press release from the bank “The study was jointly carried out by the International Monetary Fund (IMF) and the Bank of Sierra Leone to assess banking system risks and vulnerabilities with focus on testing the resilience of the industry to credit, foreign exchange, liquidity and sovereign risks.”
The study revealed that “the Banking system was vulnerable to a certain level in all of the key areas of assessment and had weaknesses which needed to be addressed.”
It was recommended “that commercial Banks should provide additional data to the Bank of Sierra Leone for financial stability analysis, perform regular self stress tests, meet the required capital adequacy ratio and be mindful of both deposit and credit concentration risks.”
Also Commercial Banks were asked to consider reducing “the interest rate spread to stimulate investment.”
Emphasizing his determination to “protect depositor’s funds” the Central Bank Governor urged commercial banks “to focus on financial intermediation rather than concentrate on investing in government securities.”
Commenting on key recommendations “to enhance Bank of Sierra Leone’s supervisory role,” Governor Sesay informed the meeting that “the quality of reporting to the Bank of Sierra Leone will fundamentally improve in depth and frequency with the introduction of the Electronic Financial Analysis and Surveillance System (E-FASS) in the near future.”
He further told the Managing Directors that henceforth “supervision of commercial banks will move from compliance based to risk based supervision and penalties will be more severe for violating prudential guidelines.”
He also disclosed that “joint banking supervision with other Central Banks in the sub region, within the framework of the sub-regional college of Supervisors of the WAMZ will commence soon.”
Governor Sesay also pointed out “that a review of the Bank of Sierra Leone and Banking Acts, was in progress with a view to vesting greater autonomy to the bank in the conduct of monetary policy and supervision of the financial sector.”
According to the release Board Chairmen and Managing Directors reportedly “voiced strong support for the Governor’s vision for the industry and the recommendations of the Study.”
“President of the Bankers Association, Mr Albert R. Saltson, welcomed the result of the Study and assured the Governor on behalf of all Commercial Banks of their willingness to work with the Bank of Sierra Leone to build a sound, robust and disciplined Financial Sector.”
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