Lamin Jahateh, Banjul
Thirteen out of the fourteen banks in The Gambia have met the minimum capital requirement as of the deadline of 31st December 2010, Central Bank of The Gambia has announced.
The Central Bank of The Gambia (CBG) has issued a directive in 2008 to increasing the minimum capital of banks in two stages from D60 million to D150 million and D200 million to be observed by end December 2010 and end December 2012 respectively.
All the banks, apart from Oceanic Bank (Gambia) Limited, met the requirement. However, Oceanic Bank (Gambia) Limited inability to increased its minimum capital requirement is because its parent company, Oceanic Bank International Plc in Nigeria, has decided to divest from all local and international subsidiaries, hence its decision not to augment the capital of Oceanic Bank (Gambia) Limited to the minimum requirement of D150 million.
A higher minimum capital requirement serves several purposes, according to the CBG. “It would ensure that banks are better able to withstand periods of economic and financial stress and therefore support economic growth; maintains market confidence in the solvency of the banking system; (iii) Imposes market discipline, provides a large cushion to protect tax payers from the risk of being called to bail out failing banks.”
The capital increase, CBG says, would further enhance the safety and soundness of the Gambian banking system which, in turn, promotes economic growth.
Earlier on the CBG has said only eight of the fourteen banks met the capital requirement of D150 million. The CBG has resolved not to grant request for forbearance if a bank fails to meet the requirement and to mitigate systemic risk that may arise from the revocation of a banking license, the CBG shall take the following actions: invoke section 45 of the Banking Act 2009 and take over the bank; thereafter the CBG may invoke Sections 48 and 51 of the Banking Act 2009 and place the institution in conservatorship to be sold, merged or restructured; and apply to the High Court for compulsory liquidation under Section 52 of the Banking Act as a last resort.