West African Economic and Monetary Union:Financial Sector Assessment Program-Technical Note on Financial Safety Net and Crisis Preparedness

The institutional and legal frameworks for financial stability in the West African Economic and Monetary Union (WAEMU) have seen significant progress since the previous Financial Sector Assessment Program (FSAP) in 2008. 1 The institutional reform of the WAEMU and the Central Bank of West African States (BCEAO) in 2010 clarified the respective mandates and responsibilities of the latter and the WAEMU Banking Commission (CBU), and it strengthened the CBU’s legal autonomy and enforcement powers. A new banking law adopted in 2010 established an overall framework for the operation and supervision of banking activities, which has been rendered more proactive and risk based with the gradual implementation of the Basel II/III mechanism initiated in 2016. A bank resolution regime was introduced in 2015 and the mandate of the deposit guarantee fund, created in 2014, was expanded to bank resolution funding in 2018. A macroprudential policy framework, including for monitoring systemic financial sector risks, was developed around the BCEAO and the Financial Stability Committee (CSF-UMOA) in 2010. This series of reforms has greatly enhanced the robustness of the financial safety net via its four components: the early intervention mechanism, the bank resolution regime, the deposit insurance system, and the emergency liquidity assistance (ELA) mechanism.