BCV Classifies Banks in terms of systemic importance, for the first time in Cape Verde

As reported by LUSA, Banco de Cabo Verde (BCV) released for the first time the classification of banks considered to be of systemic importance in the country. The measure aims to increase the resilience of the banking sector and mitigate potential negative impacts.

Jun 4, 2024 - 09:35
Jun 4, 2024 - 10:13
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BCV Classifies Banks in terms of systemic importance, for the first time in Cape Verde
BCV

As reported by LUSA, Banco de Cabo Verde (BCV) released for the first time the classification of banks considered to be of systemic importance in the country. The measure aims to increase the resilience of the banking sector and mitigate potential negative impacts.

According to the assessment, Caixa Económica de Cabo Verde and Banco Comercial do Atlântico (BCA) are classified as banks of "high systemic importance". This means that these institutions play a crucial role in the Cape Verdean financial system and have greater responsibility in establishing reserves to cushion any negative effects.

Banco Caboverdiano de Negócios (BCN) and Banco Interatlântico, owned by the Portuguese Caixa Geral de Depósitos (CGD), were classified as banks of "slight systemic importance". The Banco Angolano de Investimentos (BAI), the International Investment Bank (IIB) and Ecobank do not belong to the category of systemic institutions.

The classification considers four main indicators: bank size (35%), interconnection with other institutions (20%), substitutability (35%) and market perception (10%). Caixa Económica obtained 285 points, and BCA, 264 points, both exceeding the limit of 200 points for the "high systemic importance" category.

This assessment reflects a global trend implemented after the 2007-2009 financial crisis. The objective is to ensure that systemic banks accumulate sufficient capital in favorable periods to face potential future adversities.

In addition to publishing the classification, the BCV established the obligation for all systemic banks to set up conservation reserves. These reserves will serve as buffers to absorb losses and promote financial stability in crisis scenarios.

BCV's measure represents a positive step towards strengthening Cape Verde's banking system. By identifying and requiring reserves from systemic banks, the Central Bank contributes to the prevention of systemic risks and the promotion of a more resilient financial sector.

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