Reflections on the Africa Financial Summit: adapting to global shifts in risks and regulations

Forvis Mazars proudly participated in the Africa Financial Summit (AFIS) 2024, held from 9-10 December in Casablanca, Morocco, and sponsored the awards ceremony. Below are some reflections on the state of play and future of Africa’s financial sector.

In recent years, the world has undergone dramatic changes, challenging the status quo in unprecedented ways. This shift is evident in the numerous polarising elections of 2024. Technological advancements and climate change are introducing new and emerging risks for the banking sector, necessitating careful consideration. Additionally, the rise of deregulation pressures and increasing regulatory fragmentation pose significant risks for the future.

As we stand at a crucial global crossroad for the banking industry, it is imperative that regulation and supervision evolve to keep pace with this rapidly changing landscape. For African banks, regulators, and supervisors, monitoring these global trends and understanding their potential implications on the continent is critical.

Following the summit, we provide below our reflection on this broader state of the world and the key considerations for Africa.

“Africa is at a decisive turning point where a robust financial industry can play a decisive role in accelerating economic growth and improving people’s living conditions. Being a partner of AFIS reflects our commitment to supporting the key players in this transformation and building a more inclusive future for the continent.”

Abdou Souleye Diop, Managing Partner, Forvis Mazars in Morocco

The world has changed dramatically in recent years

Societies are emerging from the shadow of COVID-19 and its economic impact, grappling with the lingering effects of an energy crisis, rising costs of living globally, and the need to adjust to a world where very low interest rates are no longer the norm.

This is amplified by geopolitical tensions and climate-related challenges – which are only increasing, along with rapidly evolving technologies – which are introducing both opportunities and risks.

Public dissatisfaction is worsening. This is leading to a global shift in political discourse, with a common central message on economic growth and increasing national competitiveness.

This political shift was evident in 2024, which has been a year of pivotal elections and votes of no-confidence across multiple countries. Most recently, the U.S. elections in November, with the resurgence of the MAGA movement, have underscored political divisions. Similarly, domestic challenges in France and Germany highlight dissatisfaction with the status quo. Africa has also witnessed polarising elections, reflecting regional complexities within the broader global landscape.

“The growing dissatisfaction globally signals a desire for change. It also raises a critical question. How can regulators, supervisors, and industry leaders strike the delicate balance between fostering economic growth and enhancing competitiveness without compromising systemic resilience?”

Eric Cloutier, Group Head of Banking Regulations/ Head of Global FS Regulatory Centre, Forvis Mazars in the UK

The rapidly transforming world is defined by increasingly complex and interconnected risks

Three of these risks have far-reaching impacts on the banking sector globally: geopolitical, operational, and climate risks. While our assessment reflects a global perspective on those risks, they are also highly relevant for the African banking sector. These risks are also only expected to be amplified in the coming years.

Geopolitical risks

Geopolitical divisions have become more pronounced. This creates global structural challenges, with the risk of further fragmentation of the world into insulated and competing economic blocs. Such fragmentation has the potential to trigger a downward spiral of protectionism, disrupting trade, destabilising economies, and creating volatility in financial markets.

For Africa, it is crucial to monitor these developments closely, as the regional banking sector will inevitably feel the ripple effects.

Operational risks

As the African financial sector continues its digital transformation, the topic of operational risks will increasingly be important. Especially with the rise of cyber threats, the increasing reliance on third-party providers, and the rapidly evolving technologies.

Cyberattacks are increasing: 68% of European-supervised banks experienced at least one successful attack in 2023. INTERPOL’s 2024 African Cyberthreat Assessment Report also noted a rise in attacks on Africa’s financial sector, causing significant disruptions and losses.

Digital interconnectivity also increases systemic risks. An example of the fragility of financial infrastructures in a digital world is the payment system outage in Italy on 29 November 2024. This was caused by damage to fibre optic cables during roadworks, which disrupted digital transactions nationwide. This happened during Black Friday, a crucial day for retail. This highlights the interconnection of modern payment systems and the cascading effect a disruption, somewhere in the chain, can have on the entire system.

To address such digital related risks, the EU introduced a wide-reaching regulation called the Digital Operational Resilience Act, known as DORA. This regulation will have global repercussions, as it also applies to non-EU banks serving EU markets and critical non-EU third-party service providers. African banks and digital companies operating in the EU are advised to assess its impacts.

The African banking industry must also keep up with technological advances, not only AI but also new technologies such as quantum computing. These could rapidly change the banking sector.  

It is therefore important for banks to clearly identify both risks and opportunities of such technologies and invest in them adequately. For example, while AI-enabled fraud is still a concern, the same technology is now used to combat fraud and reduce AML compliance burden.

For policymakers, this requires a careful approach, to avoid new regulation stifling innovation. An example of this is the criticism faced by the EU’s AI Act.

Climate risk

Climate change is not just an environmental issue; it is a risk that is reshaping the banking sector. Natural disasters are intensifying in frequency and scale. In some regions, insurance may become unaffordable, and governments may find themselves unable to fill the funding gaps for reconstruction as climate-related disasters grow more frequent.

Some of the risks will inevitably be transferred to the banking sector. Banks must therefore prepare for tackling both the physical risks, such as damage from extreme weather events, and transition risks, including from regulatory changes.

Despite urgency, ESG regulations and supervision remain fragmented globally. For instance, the U.S. is facing a growing anti-ESG movement.

In the EU, the new Corporate Sustainability Reporting Directive, the CSRD, is expected to become a game changer for ESG disclosures, but even here there are calls to reduce the regulatory burden. The CSRD will also have global implications, being applicable to certain non-EU entities and creating compliance pressures across EU value chains. African banks are advised to stay informed about its potential implications.

Supervisors can also play a crucial role in driving the climate agenda, as we can observe in the EU with European Central Bank (ECB) mandate on climate risks.

On climate risks, progress is already being made, with many African countries enhancing their climate risk frameworks. For example, numerous African nations have signed up to the International Sustainability Standards Board (ISSB), demonstrating a growing commitment to addressing climate risks.

To succeed, the challenge of financing the climate transition in Africa must also be addressed. This will require collaboration across governments, the private sector, and international organisations.

Considering this evolving risk environment, sound regulations and supervisions remain essential

We are now entering a phase of polarised politics, with an emerging push for less regulation.

An example is the U.S., where following the results of its election of November 2024, uncertainty is mounting on the future of the Basel Endgame. To a minimum, the U.S implementation of the rules will face significant delay. Meanwhile, other jurisdictions, such as the EU and the UK, and many African countries, are already in the process of implementing Basel III. Discrepancies in implementation may lead others to follow, increasing global fragmentation risks, intensifying regulatory arbitrage, and creating compliance burdens for international banks.

Less regulation can seem attractive to banks. We must however avoid a global race to the bottom. The short-term gains would be matched by long term global consequences.

A resilient banking sector is not an obstacle to growth — it is the foundation for growth. We can take lessons on this from the 2007-2008 Global Financial Crisis. The light-touch regulation of the time resulted in inadequately assessed risks and led to costly bank bailouts.  

Regulations and supervision must evolve in Africa to address today’s challenges

The transformed world offers an important opportunity to revisit what “effective supervision” truly means.

As an example, the EU Single Supervisory Mechanism, which marks its 10-year anniversary, is reforming its Supervisory Review and Evaluation Process (SREP) for the larger banks. The aim is to create a more risk-based supervisory framework tailored to individual banks, more data-driven and forward-looking. Ultimately, it should decrease the burden on banks.

These reforms can serve as a valuable reference for African countries that have modelled their local supervisory frameworks on the ECB or are considering adjustments to their existing framework.

Maintaining a sound and coherent banking regulatory framework across Africa is crucial to support the continent’s sustained growth agenda. To achieve this, African regulators and supervisors must continue to monitor and mitigate new and emerging risks. They must also strive for alignment in their approaches to meet the international standards expected by investors. 

Additionally, banks must anticipate and allocate sufficient investments and resources to adhere to these developments.

In conclusion, growth and competitiveness in Africa must be balanced with maintaining resilience

As we navigate an era of unprecedented global shifts, Africa faces both challenges and opportunities.

Balancing growth and competitiveness with maintaining financial sector resilience will be essential. Strong public-private partnerships will remain crucial for financing economic growth and sustainability in Africa. Banks must continue to invest in digital transformation and technology to stay competitive and resilient against evolving risks. Initiatives such as green financing for renewable energy projects and adopting ESG reporting standards will be vital in the coming years.

Investments, innovation, structural reform, and targeted supervision — not deregulation — will be key to fostering sustainable economic growth in Africa in this new environment.

“From 2025 onwards, sustainable growth financing, ensuring financial inclusion, and pursuing the digital transformation agenda while maintaining cyber resilience will remain essential for the African banking sector.”

Taha Ferdaous, Partner, Banking and capital markets Practice Leader, Forvis Mazars in Morocco