Cross-Border Issues and Regional Integration in Financial Regulation

Cross-border banking services by African banks within Africa have been on the rise since the last decade. As these services are provided predominantly by complex financial institutions and involve operating within a number of African financial systems, effective regulation of such entities can be challenging. The challenges are two-fold: regulating complex financial institutions on a consolidated basis and achieving effective supervisory cooperation between home and host country regulators of these banking entities, which is critical given the cross-border nature of the services they provide. Regulation is particularly significant due to the linkages of all financial systems involved in the operation of cross-border banking services and also the ease and speed with which a crisis can spread from one jurisdiction to another - as the last global financial crisis revealed. This chapter, as such, assesses the legal and regulatory challenges inherent in the delivery of cross-border services by African banks within Africa and proposes solutions for making the operation of such services safer. Section one considers the reasons for the rise of African cross-border banks and their effect on African banking systems. Section two considers the legal and regulatory challenges inherent in their operations. Section three provides a critical appraisal of solutions for the legal and regulatory challenges by assessing the extent to which consolidated supervision, memorandums of understanding and the operation of colleges of supervisors, mitigate these challenges. Section four considers proposals for making cross-border banking services in Africa viable and section 5 concludes.