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Macro-prudential supervision

Definition

Macro-prudential oversight consists of measuring, assessing and reducing the build-up of systemic risks, i.e. risks of major malfunctions in the supply of financial services with serious consequences for the real economy (Financial Stability Board – FSB, 2011b).

Reforms undertaken in recent years have improved the systemic risk monitoring framework with a view to strengthening the resilience of the financial system in WAMU.

La création du The creation of the WAMU Financial Stability Committee (CSF-UMOA), on May 20, 2010, was part of this effort. The Committee, which includes supervisors from each of the components of the financial system (banks, insurance firms, social security and money markets) is tasked with ensuring the monitoring of systemic risks and issuing opinions and recommendations aimed at strengthening the resilience of the Union’s financial system to internal and external shocks.

Where the banking sector in the Union is specifically concerned, the current systemic risk monitoring mechanism is based on :

  • Banking sector financial soundness indicators (FSIs), which indicate the financial health and soundness of a country’s financial institutions. These indicators were set in place by the International Monetary Fund due to various banking and financial crises and because of the need to strengthen macro-prudential supervision mechanisms in the member states. In the framework of the preservation of financial stability in the Union, the BCEAO produces and monitors banking sector financial soundness indicators;
  • Stress tests designed to assess the ability of a credit institution or banking system to withstand severe shocks, are simulated through extreme (but possible) scenarios. Theimplementation of this tool also allows the BCEAO to assess the resilience of the banking sector.

Several reforms are also underway with a view to improving the regulatory framework of the financial system in the Union. These notably include projects focusing on: the adoption of macro-prudential supervision indicators for the banking and financial sector, the identification of banking institutions with systemic importance, consolidated monitoring of banking groups and supplementary supervision of financial groups.