Thanks to globalization we now have free movement of goods and services across the frontiers which indicate a borderless economy. A secured legal and commercial environment is required for progressive investment and development. In response to this pertinent global problem, and against this backdrop, Cameroon modified its Banking Regulations to guarantee and secure foreign investment.
Cameroon is a member State of the Bank of Central African States (B.E.A.C) and also a member of the Central African Economic and Monetary Community (CEMAC). These two bodies, BEAC and CEMAC constitute part of the “Franc Zone”. Franc Zone comprises the African States whose monetary policy is being directed by France especially in the domain of exchange rate with respect to currencies of other countries, convertibility to other currencies, centralization of international exchange reserves and harmonization of regulations.
The Banking Industry in Cameroon is governed by laws and regulations whose sources are listed seriatim: International Conventions, Customs Laws, Ordinances, Presidential Decrees, Ministerial Orders, Circulars and Court Decisions. These regulatory instruments are flexible in character, and can be modified depending on socio-cultural, political and economic development within Cameroon.
2. General Principles of Bank Regulations:
i. Minimum requirements: In order to promote the objectives of the regulator, certain requirements are imposed on banks; the most important minimum requirement being minimum capital ratios (MCR).
ii. Supervisory review:
To operate as a bank, the bank must first obtain a License from the regulator in order to carry on business in Cameroon. The regulator has the obligation to supervise licensed banks for compliance with the requirements and responds to breach of the requirements through obtaining undertakings, giving directions, imposing penalties or revoking the bank’s license.
iii. Market discipline: The regulator requires banks to publicly disclose financial and other information and depositors and other creditors are able to use this information to assess the level of risk and to make investment decisions. As a result of this, the bank is subject to market discipline and the regulator can also use market pricing information as an indicator of the bank’s financial health.
3. Instruments Regulating Banks in Cameroon
- The main banking regulatory instrument is the COBAC Text of 17 January 1992 harmonizing banking regulations in the six member States of BEAC. This text differentiates banks from other financial institutions as it makes provision for licensing procedure of financial institutions, appointment of its key executive members and sanctioning of contravening institutions, indicates minimum paid up capital, capital adequacy for operation of financial institutions and finally, makes provisions on risk coverage sharing and liquidity
- The Ordinance N° 85/002 of 31 August 1985 relating to the establishment of Credit Institutions or Loan Houses is one of the most important texts regulating the Banking Sector in Cameroon. This Ordinance has been ratified by Law N° 88/006 of July 1988 and Law N° 90/019 of August 10, 1990. These laws repeal the old practice whereby only persons of Cameroonian nationality had the privilege to head banking institutions in Cameroon.
- Ordinance N° 90/6 of October 26, 1990 exempts banking institutions from the payment of registration fees and stamp duties on all Deeds and Judgments relating to transfer and or resale of immovable
4. The Ohada Treaty
Apart from Conventions, Laws, Ordinances, Presidential Decrees, Ministerial Orders and Circulars that govern Banking in Cameroon, the most recent harmonized legislation that governs business activities, (banking inclusive) in the CFA Zone is the OHADA Treaty.
The OHADA Treaty lays down conditions for the incorporation, functioning and dissolution of companies (financial institutions inclusive) in the CFA Zone. An important innovation in this Text is the creation of Arbitration Court for conflict resolution. Its Permanent Secretariat is found in Cameroon while Côte d’Ivoire hosts its law courts.
5. Regulatory Bodies
- COBAC (The Banking Commission for the six Central African member States).
- The Ministry of Finance
- The National Credit Council (NCC)
- The Bank of Central African States (BEAC)
- The Banking and Credit/Finance Association (APECAM)
This role devolves mainly upon the Ministry of Finance and COBAC. The Ministry of Finance controls all banking activities especially the terms and conditions for banking services. It also receives applications for licensing and the appointment of General Managers of banks and other financial institutions and passes same to COBAC for approval/rejection. COBAC has up to six months within which to decide on such applications.
In conjunction with the National Credit Council, the Governor of the Central Bank rules on the following:
- Minimum capital for banks and finance houses;
- Conditions for opening up branch offices;
- Anti-trust issues and collaboration amongst the
The Central Bank performs the role of a Regional Central Bank as indicated above as well as issues notes. It also acts as clearing house for the banks. However, for its functions of directing monetary policy and acting as lender of last resort, it falls wide off the mark.
The law does not expressly prohibit certain banking practices but the following are covered in general terms by the Penal Code: Money laundering, constructive capital/currency exports, exchange bureau, holding of undue credit balances in nostro accounts for periods over one month.
7. INCORPORATION PROCEDURE.
Currently, Commercial Banks exist in Cameroon and operate as Public Limited-liability Companies though shares are not listed.
For incorporation and registration of banks, documents to be forwarded in two copies to the Ministry of Economy and Finance against acknowledgment of receipt are:
- The draft Memorandum and Articles of Association;
- List of shareholders;
- A business plan, budget, management structure and proposed branch network;
- Proof of deposit of the required paid-up capital and
- The names of the proposed General Manager (GM) and Deputy General Manager (DGM). For purposes of proper identification of job managers by MINFI, the following documents are required:
- A copy of Birth Certificate;
- Two passport-size photographs;
- A Certificate of non-conviction dated not later than three months from the date of signature;
- A Curriculum Vitae (CV);
- Copies of relevant Diplomas;
- Minutes of Board meeting confirming appointment;
- A Certificate of residence and
- A residence permit (for foreigners).
All of the above documents are forwarded to COBAC for examination and if within six months the answer is in the affirmative, MINFI issues the License. COBAC’s silence at the end of the six months period is also considered as a favourable response. The License is published in the Official Gazette and in at least one widely circulated national newspaper. The NCC grants the new institution a registration number, which must feature in all future correspondences of the Bank or Finance House. Once the License is granted, the new bank has up to 12 months to start functioning failing which the License will be withdrawn.
8. RESTRICTION ON INCORPORATION
Since the enactment of the 1985 Ordinance, there is no restriction on ownership, hence the existence of 100% privately-owned banks and the possibility to have offshore offices in the country.
Also, by Ordinance N° 90/7 of 18 November 1990 a new Investment Code was instituted in Cameroon. Its all-embracing purpose is to encourage and promote productive investment in the country. This Investment Code offers alluring conditions to investors in the form of guarantees. Investment in the Banking Sector is opened to all natural persons or corporate bodies of Cameroonian or foreign nationality, irrespective of their place of residence. Hence foreign nationals have the right to enjoy the same liberties and protection of the law as those granted Cameroonian natural persons or corporate bodies.
Foreign nationals also have the right to enjoy the manifold rights governing property ownership, concession and administrative authorizations. They also enjoy the right to compensation in the case of illegal expropriation.
Foreign investors have the right to hire and fire labour in compliance with the Labour and Social Insurance legislations in force.
There is also the right to freely transfer proceeds of all kind from the invested capital and in case they cease to operate, the balance of the liquidation. They are also free to transfer out of Cameroon, funds representing normal and current payments for supplies and services effectively performed, particularly in the form of royalties and sundry remuneration.
9. DOMESTIC BANKS
The functional Commercial Banks in Cameroon include:
- African Development Bank;
- Afriland First Bank;
- Atlantic Bank Cameroon;
- Banque International du Cameroun pour l’Epargne et le Crédit (BICEC) ;
- BGFI Bank Cameroon
- Commercial Bank of Cameroon (CBC);
- Ecobank Cameroon;
- SCB Cameroon;
- Société Générale Cameroun (SGC);
- Standard Chartered Bank;
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