Denny H Kalyalya: Keynote address - conference and meeting of the
Community of African Banking Supervisors (CABS)
Keynote address by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the
conference and meeting of the Community of African Banking Supervisors (CABS),
Lusaka, 29 April 2024.
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The Executive Secretary of the Association of African Central Banks AACB),
Dr Djoulassi Kokou Oloufade,
Mr. Vasily Pozdyshev, Senior Advisor, Financial Stability Institute of the Bank for
International Settlements,
Representatives of the Association of African Central Banks,
Representatives and resource persons from the International Monetary Fund,
the World Bank, Bank of England, Bank for International Settlements,
African Development Bank, Making Finance Work for Africa, the Currency Exchange
Fund (TCX),
Distinguished Speakers and Delegates,
Ladies and Gentlemen,
Good morning.
It is an honour and privilege to officiate at the 2024 Conference and Meeting of the
Community of African Banking Supervisors (CABS). Let me start by welcoming you to
Lusaka, Zambia and to the Mulungushi International Conference Center.
The Mulungushi International Conference Centre, where we are holding these meetings
today, has some historical significance not only to Zambia but to the concept of Pan
Africanism. It was at this conference centre that the Summit of the Organisation of
African Unity (OAU) formulated the mandate that translated the transformation of the
OAU into the African Union (AU) in July 2001.
Aside from rekindling the genesis of the AU, this conference centre also hosted a few
historical events including the third Summit of the Non-Aligned Nations in 1970. This is
the organisation that spearheaded the independence of most the countries in the
Southern Africa. And from the entertainment world, in the 70s, the centre hosted the
late famous ambassador of soul music, James Brown, perhaps most of you were young
then or not yet born and could not remember the legendary musician, James Brown.
Back to the Agenda, I wish to note that the CABS conference and meeting are being
held at a very challenging time. Barely recovering from the impact of the COVID-19
pandemic, the global economy is faced with a myriad of challenging vulnerabilities and
risks that have potential to destabilize the African region. You will agree with me that
Africa is a living example of occurrences of climate change events and nature-related
exposures.
Just last year, in 2023, the Southern region grappled with extreme floods which were
evident in Malawi and Mozambique due to the cyclone Freddie, a similar event
happened in North Africa, in Morocco, Libya and surrounding areas. In 2024, the
Southern African region is in the middle of a worst drought in years, with elevated
temperatures.
The extreme weather events have a devastating impact on our region, affecting
especially agricultural productivity (which threatens food security and livelihoods);
infrastructure, and electricity generation for those countries that are dependent on hydro.
The other matter of concern is the on-going geopolitical conflicts in the Middle East
including the on-going Russia-Ukraine war which pose threats to the stability of
commodity markets.
Ladies and Gentlemen. These events are real and have devastating impact on our
economies. Persistent high inflation and low growth occasioned by these events filters
through the financial system, and call for effective regulations, and supervision at both
micro and macro level to preserve stability.
It is, therefore, gratifying that the conference has incorporated these issues on the
agenda. Discussions on how to resolve these issues should begin now so that we start
developing concreate solutions.
Ladies and Gentlemen, as you deliberate over the next two days, and plan for AACB
conference later this year, I wish to implore you to be candid for us to develop solutions
to the challenges that bestow our continent.
The specific topic of interest which I note included in the agenda, is the financial stability
risks related to sovereign-bank nexus. This has become evident and a subject of
concern especially among Emerging and Developing countries.
While the rise in the sovereign-bank nexus began earlier in the decade, it surged during
the COVID-19 pandemic as economic activity declined and governments increased
fiscal support to non-financial firms and households to cushion the impact of the crisis.
To lower the potency of the sovereign-bank nexus, there have been debates on the
policy considerations. This includes, among others, suggestions to maintain larger
capital buffers and better prudential frameworks to strengthen banks and reduce both
the probability and severity of stress. Prudential policies like adjustments to risk weights
and exposure limits that restrict excessive sovereign debt holdings by banks have also
been noted to limit the exposure. However, all these views require consensus.
Chairperson, ladies, and gentlemen
It is good to note that you have dedicated some time to these discussions, and I note
that we have colleagues from the IMF and World Bank Group leading the discussions.
Ladies and gentlemen, considerations of bank resolution and crisis management and a
review of key lessons drawn from the banking turmoil in the United States and Europe
of March 2023 are also matters that deserve discussion.
This is relevant to all of us as supervisors, as the question is not whether there will be
bank crisis in our respective jurisdictions, but when there is a bank crisis, are we ready
and do we have the right tools to deal with the crisis that may ensue, especially in this
digital age.
Just this month, here in Zambia, the Bank of Zambia as the regulatory and resolution
authority took possession of one the local banks due to insolvency. It is a test rehearsal
of the inaugural crisis simulation exercise that we conducted in May 2023. And there
are a number of lessons to be learnt especially as it relates to coordination of regulators
and the fiscal authorities. It has also demonstrated that the need to have the right
playbook to contain the risks that may arise from a failed institution is critical.
Ladies and gentlemen, I have also taken note of the second day's agenda which will
review and plan the work activities under the three CABS Working Groups namely:
Cross-Border Banking Supervision; Crisis Management and Banking Resolution; and
Basel Regulations. This work is critical as it forms part of the preparatory work for the
46th Annual Meetings of the Association of African Central Banks (AACB) scheduled for
July 28 - August 2, 2024, in Tripoli, Libya.
Ladies and gentlemen, I believe that the work being done under CABS is laying the
foundation for something greater. The continent needs to move towards attainment of
having consistent prudential regulations and supervisory frameworks.
I am cognizant of the various work that we are doing under different regional blocks that
support harmonization of regulatory and supervisory frameworks, but we need to start
moving towards harmonization across the continent.
If we do not achieve harmonization, this will mean that regional and Pan-African
banking groups that operate across nations have to deal with divergent regulatory and
supervision regimes such as Basel standards, Anti-Money Laundering and Know Your
Customer rules.
Ladies and Gentlemen, in conclusion, it is my hope that CABS will continue working
hard in supporting the undertakings of the AACB Governors and keep following up on
its resolutions towards effective implementation of the objectives of the continent.
The Bank of Zambia is exceedingly privileged to host this event. Some of you may have
participated in the annual conference that Zambia hosted in Livingstone last year in
August and still have fresh memories. Lusaka is quite cosmopolitan with most of tourist
sites which may be of interest, within reachable distances. Livingstone is just about 45
minutes flight from Lusaka. There are also a number of shopping facilities and dining
areas within walkable distance of the conference center. Please, spare sometime and
sample the Zambian hospitality.
I thank you for your kind attention and wish you fruitful engagements.