The Banking Sector as an Enabler of the Economic Growth in Angola
Given the challenges faced by the Angolan economy, it’s important that banks move to adapt their capacity to address the needs of infrastructure development and diversity projects, setting their position as levers for economic growth and being available to participate in banking syndicates or other means of raising capital for those projects.
The sector faces challenges in terms of profitability and adaptation to new rules, which aim to bring it closer to international best practices, namely the implementation of International Financial Reporting Standards (IFRS) and issues related to the Economic Capital and Operational Risk.
In this context, and at a time when Data & Analytics and Big Data are on the agenda, it is important to rethink the architecture of information systems and the need to integrate multiple systems and areas of institutions.
Important aspects for 2015
Expanding the supply of products and services
The Financial & banking Sector plays a key role in financing the economy, fostering financial literacy and usage of banking services. The dynamics of the economy and competition within the sector, along with the growing demands of the regulatory framework, have influenced both the business models regarding the supply of financial products and services as well as customer service.
In the private sector, the market is gradually clustering, due to an emerging middle class and a ‘high performance’ class. The emergence of new needs, behaviours and preferences in these segments has forced entities to rethink their offerings.
Given the current situation, with the development of the capital market and an increasingly relevant intervention of the Capital Markets Structural and Management Commission (CMC) and the Angola Securities and Debt Stock Exchange (BODIVA), this will be one of the key aspects of 2015 and the following years, when one should expect the positioning of the largest companies and financial institutions in the bond market, as well as small and medium investors in the logic of alternative investment and profitability sources. Hence, the volume of transactions and revenues generated from these operations, alongside the participation of banks/financial groups in this movement, might be extremely relevant to their reputation, profitability and market positioning.
The increase in the contribution of financial services to the global performance of financial intermediation, the reduction of foreign exchange operations and structural profitability of the banking system have resulted in a growing concern about how effective are pricing models.
With the primary objective of preserving profitability levels, there have been efforts in order to strengthen the pricing management processes and tools, but also to identify and reduce lost revenue (leakage).
Of equal importance, banks have been evaluating the effectiveness of their fee collection processes. In this field, actions have focused on identifying and quantifying leakage situations, but also in reviewing the operational framework – Organization, Processes, Information Systems, Governance – Compliance and internal control environment, that are fundamental in the process of definition, parameterization, negotiation and fee collection, with the goal of a proper mitigation.
Despite the fact that, in Angola, solvency ratios have consistently exceeded regulatory demands, the evolution in methodologies for calculating capital requirements, as well as the emergence of a number of risks in the market with the potential to erode own funds, led BNA to make changes in the regulatory framework of these issues, which now places a stronger emphasis on the capital management process within institutions.
This new framework is introducing, by and large, a perspective in the calculation of requirements for own funds that demands a better knowledge of its operational risks and its Clients, being closest to an economic perspective and allowing for a greater notion of institutions’ solvency levels in the face of the risks in their activity.
Faced with these challenges, we believe 2015 and the subsequent years will be extremely challenging for the market and the Financial Institutions, which increasingly need to demonstrate that their business models are sustainable and resilient.
About Vitor RibeirinhoVitor Ribeirinho is Partner, Head of Audit of KPMG Portugal and Head of Audit and Financial Services of KPMG Angola. He has over 20 years of specialisation in the financial sector and other sectors, with extensive experience in leading engagements in Angola, Portugal and Mozambique. Vitor has a proven track record in controls' design, implementation and benchmarking. He has been involved in several projects such as, accounting advisory, accounting reorganization, consolidation, mergers & acquisitions, asset management, financial forecasts, implementation of documental circuits, research and downsizing and organizational restructuring in major companies in the financial sector.
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