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Banking Supervision Handbook

The Central Bank of The Gambia has published a comprehensive handbook for banking supervision, covering various aspects of bank regulation, risk assessment, and supervisory approaches. This summary highlights the key points from the handbook.

I. Introduction

  • Purpose: The handbook aims to provide guidance on banking supervision in The Gambia.
  • Supervisory Techniques: Off-site and on-site supervisory techniques are used to monitor bank performance.

II. Basel Capital Adequacy Accord (BCAA)

  • Capital Adequacy Ratio: Banks must maintain a minimum capital adequacy ratio of 8%.
  • Risk-Weighted Assets: Banks must calculate their own risk-weighted assets and adjust for credit risks, market risks, and operational risks.

III. Loan Classification

  • Loan Categories: Loans are classified into five categories:
    • Performing
    • Substandard
    • Doubtful
    • Loss
    • Restructured
  • Provisions: Provisions are made to cover potential losses on loans.

IV. Lending and Credit Concentration Limits

  • Credit Policies: Banks must have written policies for credit limits to control exposures to single borrowers, related groups, and geographical/economic sectors.
  • Single Large Credit Risk: Single large credit risk refers to exposure exceeding 15% of primary capital (statutory limit is 25%).

V. The Supervisory Approach

  • Risk Profile: A risk profile is developed to determine the scope and nature of supervisory activities.
  • CAMEL Rating: Banks are assigned a CAMEL rating based on five components:
    • Capital adequacy
    • Asset quality
    • Management
    • Earnings
    • Liquidity

Each component is rated (1-5), with 1 being the highest, and a composite rating is given (1-5) to reflect overall bank condition.

VI. Assigning Numerical Ratings

  • Rating Definitions:
    • I: Excellent/Strong
    • 2: Good
    • 3: Marginal
    • 4: Poor
    • 5: Unsatisfactory

Composite ratings (1-5) reflect overall bank condition, with 1 indicating a fundamentally sound bank and 5 indicating performance that threatens solvency.

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