Strengthening the Financial System: CBG Issues Guidelines and Regulations

The Central Bank of Gambia (CBG) has taken a crucial step towards strengthening the country’s financial system by issuing guidelines and regulations aimed at promoting stability in the banking sector.

Islamic Banking Framework

In 1997, the Financial Institutions Act was amended to incorporate provisions for Islamic Banking. This led to the incorporation of the Arab-Gambia Islamic Bank (AGIB) in 2004, which opened its doors to the public. The Insurance Act was also amended in 2004 to cater for Islamic Insurance, with the first Takaful company opening in 2005.

Licensing Procedures

Banks are licensed under Section 3 of the Banking Act 2009 and supervised using a combination of off-site monitoring, on-site examinations, collaboration with external auditors, annual prompt corrective action assessments, and issue of directives. The minimum capital requirement has been increased to D150 million by end-December 2010 and D200 million by end-December 2012.

Regulatory Framework

The CBG has issued a range of guidelines and regulations to ensure the stability of the financial system, including:

Management and Technical Services Agreements (Guideline 9)
Submission of Regulatory Returns (Guideline 1, Revised 2007)
Statutory Reserves (Guideline 3, Revised)
Required Reserves (Guideline 6)

Other Supervisory Activities

The CBG also houses the Credit Reference Bureau, Financial Intelligence Unit, and Collateral Registry. The Bank is a member of several supervisory colleges and is working towards implementing an explicit deposit insurance scheme.

Strengths and Weaknesses

The CBG has identified several strengths in its supervision of banks, including:

Speed in decision making
Good collaboration among stakeholders
Well-trained workforce
Adoption of international best practices

However, the Bank also faces several weaknesses, including:

Lack of an explicit deposit guarantee scheme
Capacity constraints in Islamic banking and finance
Flaws in the application of Shariah principles

Main Challenges

The CBG has identified several main challenges and obstacles in banking supervision, including:

Increasing number of banks in a small country
Absence of a capital market
Lack of robust capacity building institutions
High non-performing loans
Issues in accounting standards applied to Islamic banking

Conclusion and Recommendations

To address these challenges, the CBG recommends:

Capacity building and public sensitization in Islamic banking and finance
Introduction of mechanisms for cooperation and collaboration between member countries
Creation of national and OIC-wide crisis resolution frameworks
Adoption of international standards such as Basel II/III and IFRS