Angola - Politically driven mock compliance

Authors: Ricardo Soares de Oliveira and Rebecca Engebretsen


Angola was a relatively late adopter of Basel standards. As in other resource-rich countries, the financial sector in Angola plays a key role in facilitating outgoing financial flows. The banking sector is also highly politicised, as loans are extended, often without collateral, and bank licenses issued to political insiders. The political allocation of credit has been an important avenue for securing political support for the regime. The result has been strong opposition to the ratcheting up of bank regulation and supervision. This changed with a balance-of-payments crisis in 2009, falling in oil prices from 2014, and changes in the global regulatory environment which together meant that non-compliance with international standards was no longer an option. For Angolan banks to maintain their links to the global financial market, the country needed to signal its readiness to regulate the sector in line with international standards.[1] The result has been an upsurge in regulatory efforts since 2009, and especially since 2014. Yet, because the politicised nature of the banking sector has not changed, standards are either not implemented or are implemented but not enforced, leading to a situation of ‘mock compliance’. Political economy background

Following the end of the civil war in 2002, Angola’s economy grew rapidly, becoming the third largest in Sub-Saharan Africa. This impressive growth record was driven by rising oil production and high global oil prices. Access to abundant oil revenues eased Angola’s dependence on foreign financing.

Angola’s financial sector has played a key role in facilitating the connection between the domestic economy and international markets, with the bulk of the banking sector focusing on short-term operations connected to trade. After years of rapid growth, with the reduction in trade following the fall in oil prices, the financial sector was threatened by regulatory measures that cut its ties to the global financial system. 


GDP per capita (current USD) 4,170
Bank assets (current USD) 39.4bn
Bank assets (% of GDP) 41.3
Stock market capitalisation (% of GDP) n/a
Credit allocation to private sector (% of GDP) 21.1
Credit allocation to government (% of GDP) 21.2
Polity IV score (2017) -2

Note: All data is from 2016 unless otherwise indicated

Source: FSI Database, IMF (2018); GDI Database, World Bank (2017); Polity IV (2014)

Basel implementation to date

Angolan authorities’ engagement with the Basel Standards started with the implementation of Basel I in 1991. In 2011, Angola was assessed as compliant, or largely compliant, with only 8 out of the 25 Basel Core Principles. Significant gaps were identified especially in terms of risk assessment, consolidated supervision and enforcement. When international signalling became an urgent priority for Angolan actors from 2009, Angola moved ahead with the adoption of Basel II and 41 new regulations were drafted between 2014 and 2016. However, enforcement remains highly varied across the financial sector.

Politics of Basel implementation

The Angolan financial sector has proved beneficial for all actors involved. As long as the sector continues to be important for the survival of the political regime, mock compliance will likely be the way forward as regulators respond to the need to upkeep Angola’s particular form of financial sector extraversion.

Financial sector extraversion works differently in Angola than in other countries because banks mainly facilitate the outflow of capital derived from the exploitation of oil. The influence of the IMF and of western donors is limited. The same is true of so-called ‘regulatory networks’ of central bankers and technocrats, despite the importance of foreign banks in the country. Private banks show a lack of interest in pushing for international standards because increased regulatory oversight would hurt other parts of the financial sector in which the owners of private banks also have an interest.

Prior to the recent financial crisis, politicians, regulators and banks had little incentive to invest in the substantial costs associated with adhering to international banking standards. Indeed, strengthening bank regulation would have threatened the role banks had come to play in the country’s clientelist system. Thus, Angola’s engagement with banking standards was minimal. However, in the wake of the financial crisis, changes in the international regulatory environment meant that the non-implementation of standards was no longer an option. In order for Angolan banks to maintain their links to the global financial market, it was necessary for Angola to signal its readiness to regulate the sector in line with international standards.

Politicians played a crucial role in transforming Angola’s central bank from a passive bystander to taking a more active regulatory stance, including the implementation of Basel II. The newly appointed central bankers were internationally oriented and had a private sector background, which helped to reassure foreign banks. However, it did not mean that the sector became any less politicised. The loyalty of the technocrats was always with President dos Santos and reform measures were carefully calculated so that the position and privileges of the regime were never threatened but rather strengthened. In relation to the analytical framework, as mock compliance is driven by the conflicting preferences of politicians, this is a case of politically driven mock compliance.

[1] "Managing Angola's financial sector", Event at the Blavatnik School of Government, University of Oxford, 24 January 2017