US embassy cable - 05KINSHASA724

C O N F I D E N T I A L SECTION 01 OF 03 KINSHASA 000724 
 
SIPDIS 
 
E.O. 12958: DECL: 04/29/2015 
TAGS: EFIN, KTFN, ECON, PTER, PGOV, CG 
SUBJECT: CONGOLESE CENTRAL BANK OPERATIONS 
 
 
Classified By: Econoff Peter Newman for reasons 1.4 b/d 
 
1. (C) Summary: The Congolese Central Bank (BCC) is currently 
undergoing strong scrutiny by the IMF. It has modernized its 
methods of open market operations, but still has little 
impact in most of the country due to the general weakness of 
the banking sector. The lack of effective branch offices - 
and in two provinces the lack of branches altogether - also 
hinders the BCC's reach into the interior. Numerous money 
transfer agencies remain outside the BCC's jurisdiction, 
although the BCC heads the GDRC's anti-terrorist finance 
team. End summary. 
 
The Role of the BCC 
------------------- 
 
2. (C) The BCC has three main purposes. It is the banker for 
the Congolese government. All disbursal requests should pass 
from the Ministry of Finance to the BCC, which is not 
supposed to grant any disburals requested outside of the 
recently established electronic financial system. (Note: The 
IMF has reiterated to the BCC that it must reject all 
requests coming outside of the electronic system, even if the 
refusal would be politically difficult. End note.) Second, 
the BCC is responsible for money supply management. Last, it 
regulates the entire banking system. 
 
Managing the Money Supply - Open Market Operations 
--------------------------------------------- ----- 
 
3. (C) Until the GDRC signed an agreement with the IMF in 
2002, the BCC managed the DRC money supply by making 
individual sales to banks on a case-by-case basis. Due to 
hyperinflation throughout the 1990s, adjustments of the 
interest rate did not strongly affect the money supply. 
 
4. (C) On the recommendations of the IMF, the BCC currently 
uses the Holland Method of public tenders to determine the 
price of Congolese francs on the market. It is looking for 
the lowest exchange rate, or the rate that is closest to the 
estimated market price. Once the price is set for the tender, 
then all banks are required to pay the tender-determined 
price. The BCC works with the Congolese Banking Association 
to execute the tenders. Branch offices do not autonomously 
perform open tenders, and BCC headquarters in Kinshasa must 
approve all purchases and sales of currency. (Comment: This 
limits the reach of the BCC into the interior of the DRC. The 
lack of an integrated electronic network between BCC branches 
and Kinshasa hinders communication and the approval process 
for the branches. End comment.) 
 
5. (U) There is not a significant number of banks operating 
in the DRC. The primary banks and their ownership are: 
 
-Banque Commerciale du Congo (BCDC) - Banque Belgolaise, 
Congolese Government, and private investors 
 
-Citibank - US 
 
-Stanbic Bank - Standard Bank of South Africa 
 
-Rawbank - locally-owned by the Rawjis, a Pakistani family 
who arrived in the Congo in 1922, correspondent with Banque 
Bruxelles Lambert 
 
-Banque Internationale pour l'Afrique au Congo - multiple 
investors including Natexis Popular Bank, Credit Agricole 
Indisuez, and Banque Bruxelles Lambert 
 
-Banque Internationale de Credit (BIC) - Belgolaise 
 
-Banque Congolaise - Congolese and Lebanese ownership, 
correspondent with Bank of Beirut and American Express Bank 
 
-Union des Banques Congolaises (UBC) - Congo, parastatal 
 
Of these, only BCDC, Rawbank, and UBC have branches in cities 
other than Kinshasa. Some recently liquidated banks had 
branches in multiple cities. Banking is essentially 
non-existant outside of Kinshasa, Matadi and Lubumbashi. 
 
6. (U) There are two microcredit banks currently operating: 
 
-Trust Merchant Bank (owned by an Amcit resident of 
Lubumbashi) 
 
-ProCredit Congo (supported by IPC and German Technical 
Cooperation) 
 
7. (C) The BCC also adjusts interest rates to try to 
stimulate changes in the money supply. It has recently raised 
interest rates three times to try to curb speculation against 
the franc. Adjusting interest rates has a limited effect on 
the money supply, however, due to the extremely low levels of 
savings and investment in the DRC. 
 
Branch Offices 
-------------- 
8. (C) The BCC has branch offices in all provinces except 
North Kivu and Maniema. This is because those two provinces 
were once combined with South Kivu to compose a single Kivu 
province, with the provincial capital at Bukavu - now the 
capital of South Kivu. The BCC is currently in the process of 
establishing an autonomous agency in Kindu, Maniema. It, 
however, is not yet considering placing an office in Goma, 
North Kivu due to ongoing political complications. In places 
where neither a branch office nor an autonomous agency exist, 
the BCC signs agreements with a commercial bank operating in 
those places (normally BCDC or UBC) to operate for the BCC. 
This is currently the case in Beni, North Kivu. 
 
9. (C) Although the BCC Governor previously had the right to 
name all the branch office and autonomous agency managers, he 
now must submit all nominations to the Conseil 
d'Administration (Board of Directors) of the BCC. 
 
10. (C) Branch offices are not permitted to buy and sell 
currency without the approval of BCC headquarters in 
Kinshasa. Furthermore, the branch offices can only hold up to 
a few hundred million francs at any one time. At current 
exchange rates, this limits the branch offices to about $5 
million. Although for some branch offices, such as Mbandaka, 
Equateur, $5 million is sufficient for day-to-day operations, 
that quantity is insufficient in major trade zones, for 
example Boma/Matadi and Lubumbashi. 
 
Outside The System: Money Transfer Agencies 
------------------------------------------- 
 
11. (C) Most money transfer agencies are outside of BCC 
control. They operate with little regulation. They cannot buy 
or sell currency with the BCC. Some agencies and "bureaus de 
change" operate entirely informally. 
 
12. (C) The BCC has granted certain agencies, including 
Western Union and MoneyGram, special status. They are 
nominally under BCC regulation and can do limited 
transactions with the BCC. 
 
13. (C) Given the presence of a major diamond market, weak 
banking system, and rampant corruption in the government tax 
and customs services, the potential for money laundering - 
through customs fraud, money transfers, etc - is high. The 
BCC recognizes the dangers unregulated money transfer 
agencies and bureaus de change pose for criminal activity, 
but is at present incapable of effectively bringing the 
agencies under its surveillance. 
 
Fighting Terrorist Finance 
-------------------------- 
 
14. (C) The GDRC has established an interagency 
counterterrorism task force. The BCC leads the terrorist 
finance commission and maintains lists of terrorists, 
including UNSCR 1267 and 1373 lists. Up to now, the GDRC has 
neither seized any assets under UNSCR 1267 or 1373 nor has it 
filed the necessary reports to the 1267 and 1373 commissions. 
The BCC explained that the Foreign Ministry and the National 
Security Advisor still need to clear the reports. 
 
Comment 
------- 
 
15. (C) The BCC is making strides with the IMF to liquidate 
insolvent banks, better regulate the solvent ones, and 
modernize BCC operations. In spite of the BCC's relatively 
successful reforms, the banking system in the DRC remains 
weak and will continue to be so until economic confidence 
returns. The BCC's ability to manage the money supply will 
continue to be severely restricted due to the lack of savings 
in the economy and intra-governmental pressure to make 
disbursals outside of the traceable electronic network. That 
most commercial financial transactions occur informally will 
also hinder the BCC's ability to monitor money laundering and 
terrorist finance. End comment. 
DOUGHERTY