Mozambique: Banking regulator taking tough stance on risk aversion – economists

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Mozambique: Banking regulator taking tough stance on risk aversion – economists

9:06 CAT | 08 May 2023

File photo: Lusa

Two Mozambican economists told Lusa on Friday that the appointment of a resident inspector for the BCI bank by the Bank of Mozambique shows a “very interventionist” and “risk aversion” stance by the financial regulator.

The Bank of Mozambique a week ago announced the appointment of a resident inspector at Mozambique’s Banco Comercial e de Investimentos (BCI), to strengthen monitoring of that bank majority-owned by two Portuguese banks, (the Portuguese state-owned) Caixa Geral de Depósitos and BPI.

“The Bank of Mozambique has opted for a more disciplinary stance on the financial system, perhaps to reduce the risks of instability. I have seen a very interventionist bank, due to risk aversion, perhaps,” said Egas Daniel, an economist and coordinator of the Mozambique programme of the International Growth Center (IGC) of the London School of Economics.

Daniel noted that the Mozambican financial regulator believes that it should “be close” to financial institutions with systemic importance, because the country’s banking sector is “concentrated” and dominated by “an oligopoly,” or a small group of companies with a lot of influence in the market.

The Mozambican central bank “has been very close, very strict in disciplining the banks and the financial system,” and “does not hesitate to take extreme measures,” he said.

The economist noted that the fact that the Bank of Mozambique had appointed a figure from within the BCI as resident inspector at the bank itself showed that the situation at the bank was “less serious” and that the regulator’s action had a “preventative” purpose.

The central bank wants to send a message that it is keeping a close eye on BCI’s operations and that more drastic measures will be taken if necessary.

The rigour with which the Mozambican central bank is exercising “discipline” over the financial market had already been noted when Standard Bank saw its foreign exchange operations suspended by the regulator in 2021, following anomalies, noted Egas Daniel.

Daniel pointed out that the central bank’s stance of greater intervention in the domestic financial market began with the appointment as governor of the Bank of Mozambique in 2016 of Rogério Zandamela, a figure with a long career at the International Monetary Fund (IMF).

Since Zandamela took office, several bankers in Mozambique have been suspended from activity, as a sanction for practices considered contrary to the legislation of the sector.

In his turn, Elcídio Bachita, economist and analyst, argued that the central bank is fulfilling its role as “regulator and controller” of the financial system.

By appointing a resident inspector to the BCI, the central bank wants to ensure that the institution complies with “the procedures prescribed” by the sector’s norms, Bachita said.

On the other hand, the Mozambican central bank has become stricter with the need to pay attention to the risks of money laundering and financing of terrorism.

In the press release about the intervention in BCI, the regulator said that the resident inspector will monitor “the bank’s business model and strategy, monitor and analyse developments in the internal control system and attend relevant meetings of governing bodies.

“Notwithstanding this supervisory action, the Bank of Mozambique communicates that Banco Comercial e de Investimentos remains sound and stable,” the statement concluded.

BCI is the most systemically important bank in Mozambique, followed by Millennium Bim (Portugal’s BCP group) and (South African) Standard Bank.

Source: Lusa