Internal procedures for credit institutions in Cameroon must comply with the regulations of the Central African Banking Commission (COBAC), which require the establishment of a formalized internal control system, the regularization of customer due diligence processes, and strict adherence to the national credit law of 2019.
Regulatory & Compliance Framework on Internal Procedures for a Credit Institution in Cameroon
COBAC Regulation R-2016/04: Credit institutions and microfinance institutions are required to put in place comprehensive internal control systems, an independent compliance function, and a dedicated permanent unit for ongoing risk monitoring.
Law No. 2019/021: This instrument specifies the rules governing the granting of credit, imposing a legal obligation upon institutions to verify the repayment capacity of borrowers prior to the extension of any credit facility.
Criminalization of Default Debt: The 2019 law classifies bad-faith borrowing as a criminal offence, empowering institutions to institute legal proceedings before the criminal courts within a period of 60 days from the date of default.
Mandatory Internal Credit Procedures of a Credit Institution in Cameroon
A. Customer Onboarding & KYC
Identity Verification: Establish baseline CDD procedures tailored to ensure absolute compliance with CEMAC’s anti-money laundering and counter-terrorist financing directives.
Data Gathering:
For natural persons: Gather essential financial verification records, including pay slips, income statements, investment returns, and active loan schedules.
For businesses: Audited financial statements and business registration documents are to be obtained from the Centre de Formalités de Création d'Entreprise (CFCE).
B. Risk Assessment Procedure of a Credit Institution in Cameroon
Character: This entails the evaluation of the borrower's credit history.
Capacity: Assess debt service coverage ratios using pre-contractual information.
Capital & Collateral: Verify the legal status of offered guarantees in conformity with the guidelines of OHADA Law.
Conditions: Determine and assess the overall macroeconomic and market environment.
C. Loan Approval and Disclosure Procedure for a Credit Institution in Cameroon
Transparency Directives: The draft agreement must be disclosed which shall illustrate the overall effective rate (TEG) and amortization schedule.
Credit Committees: Dual-control signing procedures must be implemented, and the loan origination and risk-approval functions must be strictly separated, so as to prevent agency risks and conflicts of interest.
D. Monitoring and Internal Control of a Credit Institution in Cameroon
Permanent Controls: This entails the execution of routine operational evaluations and internal audits to prevent internal fraud and detect bad portfolios.
Reporting: This entails the transmission of regulatory reports to National Economic and Financial Committee databases to prevent multiple borrowing or high-risk defaults.
Reporting institutions must draw up and keep up to date manuals of procedures relating to their various activities. These documents must, in particular, describe the procedures for recording, processing and returning information, the accounting schemes and the procedures for initiating operations.
Reporting institutions must also draw up, under the same conditions, a procedure manual which specifies the means intended to ensure the proper functioning of internal control, in particular:
Different levels of responsibility.
The responsibilities and resources allocated to the operation of the internal control system.
The rules, which ensure the independence of these systems under the conditions, set out in article 22 of the 2016 COBAC regulation relative to internal control.
The procedures relating to the security of information and communication systems and business continuity plans.
A description of the systems for measuring, limiting, monitoring and controlling risks.
The organization of the compliance control system.