Industry overview
As previously stated, in major African economies, the banking industry is typically split into categories (tiers) based primarily on factors such as asset size, regulatory capital, and market influence. Tier 1 banks reference the largest by assets and are distinguished from smaller institutions by these key features:
- Regulatory capital: Tier 1 banks have higher regulatory capital thresholds, typically to facilitate their cross-border operations. They also tend to have stricter liquidity thresholds and greater regulatory oversight in general.
- Substitutability: These banks typically have the largest asset bases, branch networks, and the most comprehensive service offerings. The harder it is for competitors to replace these services, the more critical the bank becomes.
- Interconnectedness: This attribute is assessed through the scope of net interbank transactions. The greater the scale and frequency of the connections, the more important a bank is.
According to the IMF, North and West African regions jointly account for 52.5%
