Banking Risks In Regional And Local Banks In Botswana, Tanzania, Uganda And Zambia

By Morris Mulomba
1999
The financial system is key to an efficient and robust economy. Financial institutions and banks particular, provide vital functions to the economy such as financial intermediation, which involves the channelling of savings to productive uses in the economy. The importance of financial sector creates the need for supervision as failure to do so can result into financial or banking crises. This would in turn disrupt the payments systems cause contagion runs and may also cause a decline in domestic savings and/or a large scale capital outflow. As far as the banking sector is concerned it has been overserved within MEFMI member countries that regional and local banks are a high risk in the financial sector because of the risks profile of their businesses. There is a concern with these banks in spite of their relatively small sizes in the financial sector because of the high failure rate among them. This potential to fail threaten the stability of the banking sector and the financial sector at large. The management of risk is cardinal in all banks if there is going to be stability in the banking sector of the region. Bank supervisors should as a matter of urgency require that all banks have formalized risk management systems in order to contain the ever present threat of banking risks . To do this bank supervisors should themselves re-orient their supervision methods of risks in the banks they supervise.