Nyamuzinga noted that as with banks all over the world, banks in Africa should already be compliant with the new IFRS 9 accounting standard, which changes the way they calculate expected credit losses.

He added: “There is also need to start thinking about the new ‘Basel IV’ framework, which impacts on how banks calculate their risk weighted assets, and the amount of capital they need to offset those risks.”

According to him, another source of regulatory pressure banks are grappling with are the requirements, questions and challenges related to conducting stress tests, as the regulators become more stringent on stress testing processes.

“If either of these calculations, which are based on risk models, are incorrect, banks will not only have to worry about non-compliance penalties but also the capital shortfalls, reputational impact and negative impact on earnings performance.

“There’s a good chance that banks in Africa could get this wrong if they use disparate and fragmented systems for data management, model building and implementation and reporting – which is often the case – or if they try to do the computations manually.

“The biggest causes of incorrect modelling are data management and quality issues and skills shortages. Banks have to obtain and analyse enormous amounts of detailed data, for example. And, to comply with IFRS 9, banks must look at millions of customers with hundreds of data points.”

Buttressing these claims, SAS Sales Manager, West Africa, Babalola Oladokun, said: “If a bank miscalculates an individual’s credit score, for example, it could end up granting a loan to someone who can’t afford to repay it, which has implications for IFRS 9expected credit loss calculations. And if the bank does not have enough capital on hand to offset the risk of non-payment of that loan, it will run into Basel Capital requirements compliance issues.

“Data gathering and manipulation from disparate data sources wastes time and resources that banks could have used to develop new products and find more convenient ways to serve their customers – something their competitors in the FinTech space are very good at,” he stated.

As a result, he said FinTechs are using entirely new data streams to make instant, value-adding decisions for customers, saying for example, they’re basing their decisions to grant a loan to someone who doesn’t have a bank account or credit history on how often that person recharges their mobile phone – an innovative way to give the unbanked population access to finance.