Financial Crime World

Guidelines for Banking Institutions in The Gambia

Capital Adequacy

The Capital Adequacy framework is designed to ensure that banking institutions in The Gambia have sufficient capital to absorb potential losses and maintain stability.

Definition of Capital

  • Paid-up capital
  • Share premium
  • Assigned capital
  • Statutory reserve
  • Undivided profits
  • Undisclosed reserves
  • Preferred shares
  • Subordinated term debt

Tier 1 and Tier 2 Capital

  • Tier 1 Capital: Paid-up capital, share premium, assigned capital, statutory reserve, and undivided profits.
  • Tier 2 Capital: Undisclosed reserves, preferred shares, and subordinated term debt. The total of Tier 2 capital may not exceed 50% of Tier 1 capital.

Amortization of Preferred Shares and Subordinated Term Debt

  • Preferred shares and subordinated term debt are subject to straight-line amortization in the final 5 years prior to maturity.

Liquid Asset Standards

Banking institutions must maintain a fixed proportion of liquid assets against their aggregate liabilities to the public in The Gambia.

Minimum Liquid Asset Ratio

  • The Central Bank sets a minimum liquid asset ratio, which is currently 30%.
  • Failure to attain the prescribed ratio exposes the institution to fines based on the deficiency in liquid assets.

Statutory Reserve Requirements

Banking institutions must maintain a reserve account, known as the statutory reserve.

Allocation of Transfers

  • Transfers to the statutory reserve must be allocated from net profits of each year after due provision for taxes and before declaring dividends or transferring any profits to head offices or elsewhere.

Minimum Transfer Requirement

  • When the statutory reserve is less than the amount represented by paid-up capital at the financial year-end, a bank is required to transfer a minimum of 25% of its net profits after taxes each year to the reserve until the deficiency has been eliminated.

Conclusion

These guidelines are intended to ensure that banking institutions in The Gambia maintain adequate capital and liquidity, and comply with relevant regulatory requirements.