Determining the Protection Mechanisms of Banker’s Advances within the CEMAC Zone: A Cameroonian Experience

Abstract

It is usual nowadays that one of the principal activities of a bank is to grant advances to the public either on short, medium or long term basis. These advances or loans are seen to constitute a vital source of revenue or profit for a bank, and as such define the very nature and purpose of the banking business. However, credits or advances granted constitute a risky venture for banks, reason being that the advance granted may not be reimbursed when they become due or mature. This is generally the case when the debtor runs insolvent, dies, absconds, or is delinquent or simply unwilling to repay the advance. In any of these circumstances, the bank will find it difficult to recover its debts, if special measures were not put in place at the time the advance or loan was given out. This might even cause the financial distress or liquidation of the bank if the situation is not properly salvaged on time. The aim of this work therefore is to determine the legal and practical mechanisms put in place for the protection of banker’s advances and to advice on the strengthening of same by bringing out recommendations that will render the protection mechanisms of banker’s advances more efficient and feasible. In carrying out this research work, the doctrinal method of legal research was engaged, drawing from primary and secondary sources of data. This study reveals that bankers sometimes face difficulties with regards to their advances especially during recovery which eventually affects the entire running of the bank. This practically stems from lack of proper implementation or compliance with the laws and regulations in force, textual lapses and ambiguities in some of the laws and regulations, insider lending, just to name but a few. It is therefore recommended inter alia that, bankers should strictly observe and adhere to the mechanisms put in place for the protection of their advances so as to guarantee a much better level of stability and sustainability within the banking sector, and more precisely to guard against credit risk or financial distress faced by banks upon customers’ default.