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GAMBIA: CENTRAL BANK ISSUES DIRECTIVES ON CAPITAL AND RESERVE REQUIREMENTS FOR FINANCE COMPANIES

Strengthening the Financial Sector in The Gambia

The Central Bank of The Gambia has taken a crucial step towards enhancing the stability and resilience of finance companies operating in the country. A set of directives, effective from June 30, 2017, aims to promote a robust financial sector that can withstand potential shocks.

Key Directives:

  • Elimination of Total Preferential Shares: Finance companies are no longer allowed to capitalize “Total Preferential Shares”, which were previously considered as an investment fund. This move is aimed at promoting transparency and a more robust capital base for these institutions.
  • Minimum Capital Requirement (MCR): Finance companies have been given an extension period of December 31, 2018, to meet the MCR of D50 million. This requirement ensures that finance companies maintain sufficient capital to absorb potential losses and maintain stability in the financial system.
  • Waiver for NACCUG: The Central Bank has waived the Required Reserve requirement of 8% for NACCUG, which operates as an apex institution for credit unions. However, this waiver does not apply to other finance companies, which will still be required to meet the 8% reserve ratio.
  • Investment in Treasury Bills: Finance companies are now required to invest at least 30% of their total deposit liabilities in Treasury Bills and obtain prior approval from the Central Bank before rediscounting these securities. This move is aimed at promoting liquidity and reducing the risk of financial instability.
  • Capital Adequacy Ratio (CAR): The CAR for finance companies has been increased from 16% to 20%. This requirement ensures that finance companies maintain a strong capital base and are able to withstand potential shocks in the financial system.

Compliance and Penalties

Finance companies that fail to comply with these new requirements by June 30, 2017, will face penalties. The Central Bank has emphasized the importance of adhering to these directives, which are aimed at promoting stability and resilience in the Gambia’s financial sector.