Wednesday, May 7, 2014

Access Bank (Gambia) Ltd. and Keystone Bank (Gambia) Ltd. under supervision : who's next?

The Central Bank of the Gambia's announcement that Access Bank (Gambia) Limited and Keystone Bank (Gambia) Limited, two Nigerian banks, have been "taken over" is just one more reminder of a struggling monetary policy environment that remained persistent throughout the period of the Jammeh regime, but particularly since 2007.

The exponential growth in the number of commercial banks in The Gambia since the year 2000 is phenomenal as it is worrying.  Between 2007 and 2010, the number of banks doubled from 7 to 14 which represents a phenomenal rate of growth for any economy, regardless of size.  But for a small economy like The Gambia's, it is worrying.  The doubling of the number of banks resulted in intensified competition and diminished profits, bringing the sustainability and viability of these banks into the fore.

In 2010, two banks went into voluntary liquidation.  They were Prime Bank Gambia (PBG) Limited and Oceanic Bank Plc. who opted to close shop than meet the two-step increase in the minimum capital requirement implimented end 2010 and end 2012.   Of course, Prime Bank (PBG) was accused by the United States Treasury Department of "money laundering" and "funding international terrorism" which provided the convenient cover and a decision point for management to opt for liquidation.

Recent increases in the reserve requirement on deposits did two things :  they increased banks' intermediation costs by depriving them on income they could have generated income for them, and in requiring high reserves, it placed fiancial squeeze on small and less efficient bank.  There are many weak and exposed banks that run the risk of going under at anytime.

There is currently one bank that has changed hands before, that is about to change hands again to be bought reportedly by a Gambian businessman.  We are still in the process of getting additional details as the bank in question continues to invite its premium and preferred clients for consultations about the possible transfer of ownership.

The Central Bank announcement was issued on Monday but was deliberately ignored by the regime's own mouthpiece, The Daily Observer, that acts as the paper of record.  By ignoring the fact that two banks have been "taken over" by the Central Bank as it "sort out irregularities in their operations."  According to, "the move is meant to stabilize and bring sanity to the Gambia's Nigerian-dominated banking industry."  That sanity will not come until more banks go under, allowing the strongest and viable banks to re-organize themselves to serve their clients and the economy better.