Improving Banking Supervisory Mechanisms
In the OIC Member Countries
60
 A significant fraction of OIC countries does not have an explicit deposit insurance
scheme, which should be improved to achieve a banking system which is immune to
bank panics and systemic banking crisis.
 Most OIC countries do not engage in derivative trading activities and work with
relatively low leverage levels. Expansion of the banking sector towards these areas
might create problems, thus regulations of Basel III should be applied and monitored
closely.
Table 26: SWOT Analysis – OIC Countries
Source: World Bank, Bank Regulation and Supervision Survey
Strengths, Weaknesses and Threats Analysis
Supervision Criteria Strengths Weaknesses Threats
Scope of Banking Activities Strong restrictions on permissible activities. No major weaknesses
Financial deepening may
change the current structure.
Ownership Restrictions
Strong restrictions on ownership structure for
banks.
No major weaknesses
Capital Regulations
Stong capital regulations beyond the levels of
EU-27 and US.
Limited coverage of capital requirements on market
and operational risk.
Changes in BASEL III.
Supervisory Power
Most OIC countries have autonomous
supervisory authority for banking regulation.
In most OIC countries supervisory authority also
regulates financial sector. Supervisory power decline
in the aftermath of the 2008 crisis.
Structure of Supervision
Supervisory experience is equal to EU-27 level
slightly lower than US. Independence index
equal to EU-27 and US. Internaitonal standards
In most OIC countries supervisory authority also
regulates financial sector.
Private Monitoring
Stronger than EU-27 and US. Most OIC
supervision authorities use certified external
auditers.
No major weaknesses
External Governance Equlally strong to EU-27 and US. No major weaknesses
Restrictions on Entry into Banking Sector Strong entry restrictions and licencing criteria. No major weaknesses
Deposit Insurance
Fraction of OIC countries with explicit deposit
insurance schemes is still low.