Basel III in Africa: Making It Work

Abstract

Basel III is a framework to protect the global banking system. This article provides a policy discussion on Basel III in Africa. The significance of Basel III is discussed, and some ideas to consider when implementing Basel III to make it work in Africa, are provided. Under Basel III, the African banking industry should expect better capital quality, higher capital levels, minimum liquidity requirement for banks, reduced systemic risk, and differences in Basel III transitional arrangements. This article also emphasizes that (i) there should be enough time for the transition to Basel III in Africa, (ii) a combination of micro and macro-prudential regulations is needed; and (iii) the need to repair the balance sheets of banks, in preparation for Basel III. The discussions in this article will benefit policymakers, academics and other stakeholders interested in financial regulation in Africa such as the World bank and the International Monetary Fund (IMF).

Keywords: Basel III, Bank business models, Bank performance, Financial stability, Capital regulation, Bank regulation, Africa

JEL Classification: E44, G21, G28