Financial distress has afflicted numerous local banks IN Cameroon, many of which have been closed down by the regulatory authorities or have been restructured under their supervision. In
Cameroon banks such as the B.I.C.I.C. Meridian B.I.A.O. Cameroon Bank were closed
Many more local banks were distressed and subject to some form of
"holding action". Failed local banks accounted for as much as 23 per cent of total commercial bank assets in Cameroon.
The cost of these bank failures is very difficult to estimate: much of the data is not in the public domain, while the eventual cost to depositors and/or taxpayers of most of the bank failures which occurred between the 1988 to 2004 period will depend upon how much of the failed banks' assets are eventually recovered by the liquidators. The costs are almost certain to be substantial.
Most of these bank failures were caused by unprofitable loans. Areas affecting more than half the loan portfolio were typical of the failed banks. Many of the bad debts were attributable to moral hazard: the adverse incentives on bank owners to adopt imprudent lending strategies, in particular insider lending and lending at high interest rates to borrowers in the most risky segments of the credit markets.
Insider lending
The single biggest contributor to the bad loans of many of the failed local banks was insider lending. In at least half of the bank failures referred to above, insider loans accounted for a substantial proportion of the bad debts. Most of the larger local bank failures in Cameroon, such as the Cameroon Bank, B.I.A.O. Bank and B.I.C.I.C. Bank, involved extensive insider lending, often to politicians. Insider loans accounted for 65 per cent of the total loans of these local banks, virtually all of which was unrecoverable.
Almost half of the loan portfolio of one of the local banks local banks