The Banking Act 2009

Banking Act 2009: Practical Guide for Businesses, Investors and the Public

This guide explains how banking institutions are licensed, regulated and supervised in The Gambia, and what protections and obligations exist for customers, businesses and investors.

Introduction

The Banking Act 2009 regulates banking institutions operating in The Gambia, establishes licensing requirements, governs capital adequacy and corporate governance, protects depositors, and gives the Central Bank of The Gambia extensive supervisory and enforcement powers. The Act also contains specialised provisions for Islamic banking institutions.

1. Who Requires a Banking Licence?

Banking Business

Sections 2 and 3

A person or institution may not carry on banking business without a licence issued by the Central Bank. Banking business includes:

• Receiving deposits.

• Operating savings and current accounts.

• Providing finance.

• Investment management services.

• Corporate and investment advisory services.

• Other activities designated by regulation. ss.2, 3.

Penalty for Unlicensed Banking

A person carrying on banking business without a licence commits an offence and may face:

• A fine of up to D500,000.

• Imprisonment for up to 10 years.

• Or both. s.3(3).

Why This Matters

Businesses offering deposit-taking products, lending structures, financial schemes or banking-type services should ensure they do not inadvertently engage in regulated banking activities without licensing.

2. Obtaining a Banking Licence

Application Requirements

Section 4

An application for a banking licence must include:

• Memorandum and Articles of Association.

• Details of proposed directors.

• Details of the Chief Executive Officer.

• Information on major shareholders.

• Proposed business locations.

• Business plans.

• Capital information. s.4(2).

What the Central Bank Considers

The Bank may investigate:

• The applicant's history.

• The integrity and experience of directors.

• Adequacy of capital.

• Community need for the institution.

• Profitability prospects.

• Impact on existing banks. s.4(3).

Investor Insight

The licensing process is designed to ensure that only financially sound and properly managed institutions enter the banking market. Investors should pay close attention to management quality and capital adequacy when assessing banking investments. s.4(3).

3. Use of the Word "Bank"

Restricted Terminology

Sections 5 and 6

Only licensed banking institutions may use:

• The word "bank".

• Derivatives of the word.

• Any name or symbol suggesting banking activities. s.5.

The Central Bank may refuse names that:

• Closely resemble existing institutions.

• Could mislead the public. s.6.

Why This Matters

Members of the public should be cautious when dealing with businesses that appear to provide banking services but are not licensed banks.

4. Branches, Relocations and Expansion

Opening New Branches

Section 7

A banking institution may only operate:

• In the locations authorised by its licence.

• In the type of business authorised by its licence. s.7(1).

The Central Bank's approval is required before:

• Opening a new branch.

• Relocating a branch.

• Closing a branch. s.7(2).

5. Ownership and Investment in Banks

Significant Shareholdings

Section 8

No person may acquire ownership or voting control exceeding 10% of a banking institution without prior approval from the Central Bank. s.8(2).

Mergers and Acquisitions

Central Bank approval is required before a bank may:

• Merge with another institution.

• Consolidate operations.

• Transfer substantial assets.

• Reduce capital.

• Amend constitutional documents. ss.8(5) and 8(9).

Investor Considerations

Investors seeking strategic stakes in a bank must obtain regulatory approval before acquiring controlling influence. The Act prioritises financial stability over unrestricted ownership. s.8.

6. Revocation and Cancellation of Licences

Grounds for Regulatory Action

Section 9

The Central Bank may revoke or cancel a licence where a bank:

• Fails to commence operations.

• Breaches licence conditions.

• Breaches the Act.

• Ceases operations.

• Operates unsafely.

• Obtained a licence through false information. s.9(1)-(2).

Rights of Appeal

Section 10

Affected institutions may appeal certain revocation decisions to the High Court. ss.9(7), 10.

7. Islamic Banking

Islamic Banking Licences

Sections 12-17

Islamic banking institutions require a separate licence from the Central Bank. s.12(1).

The Act requires Islamic banking institutions to:

• Operate according to Sharia principles.

• Avoid usury (interest).

• Share profits and losses appropriately.

• Disclose profit allocations to investors and depositors. ss.12(2), 13.

Transactions with Conventional Banks

Islamic banks must not engage in conventional interest-based banking transactions. s.14(1).

Penalty

Violation may result in fines of at least D100,000. s.14(2).

8. Capital and Financial Soundness

Capital Requirements

Section 18

Every banking institution must maintain minimum capital levels prescribed by the Central Bank. s.18(1)-(2).

Why Capital Matters

Capital acts as a financial cushion protecting:

• Depositors.

• Investors.

• Creditors.

• The wider financial system. s.18.

Reserve Accounts

Section 19

Banks must maintain reserve accounts and transfer prescribed amounts of annual profits into those reserves before paying dividends. s.19(1).

Liquid Asset Requirements

Section 20

Banks must maintain sufficient liquid assets to meet obligations to the public. The Central Bank may prescribe minimum liquidity requirements. s.20(1).

Penalties

Institutions that fail to satisfy liquidity requirements may incur regulatory penalties and daily charges. ss.20(5)-(7).

9. Lending Restrictions and Risk Management

Large Exposure Limits

Section 23

A bank generally may not expose itself to a single borrower or related group beyond limits established by the Act and regulatory approval requirements. s.23(1)(a).

Insider Transactions

The Act restricts lending to:

• Directors.

• Officers.

• Related parties.

• Persons connected to management. s.23(1)(c).

Why This Matters

These provisions protect depositors by reducing excessive risk-taking and conflicts of interest.

10. Financial Reporting and Transparency

Financial Statements

Section 24

Banks must regularly submit:

• Balance sheets.

• Asset statements.

• Liability statements.

• Profit and loss information.

to the Central Bank. s.24.

Audits

Sections 25 and 26

Every banking institution must appoint an auditor acceptable to the Central Bank. s.25(3).

Auditors must report matters such as:

• Regulatory breaches.

• Fraud.

• Major losses.

• Serious irregularities.

• Risks to depositors. s.26(2).

Public Transparency

Banks must:

• Display their latest balance sheet.

• Publish financial statements in newspapers. s.25(8).

11. Powers of the Central Bank

Examination Powers

Sections 27 and 28

The Central Bank may examine a banking institution at any time to assess:

• Financial condition.

• Compliance with the law.

• Risk management practices. ss.27-28.

Banks must provide:

• Books.

• Records.

• Accounts.

• Securities.

• Internal manuals.

• Other information requested by examiners. s.28(1).

Corrective Measures

Section 29

Where a bank is operating unsafely or is financially unsound, the Central Bank may:

• Require corrective action.

• Appoint advisers.

• Suspend licences. s.29(1).

Unsafe and Unsound Practices

Section 67

The Central Bank may direct a bank to:

• Stop certain practices.

• Restrict lending.

• Restrict investments.

• Suspend directors or officers.

• Limit deposit-taking activities. s.67.

12. Corporate Governance

Directors and Senior Management

Sections 31-35

Banks must:

• Appoint a Chief Executive Officer.

• Obtain approval for senior management appointments.

• Obtain approval for directors. ss.31-32.

A board must consist of at least five members and be chaired by a non-executive director. s.32.

Director Duties

Section 34

Directors must:

• Act honestly.

• Act in good faith.

• Exercise care, diligence and skill.

• Act in the best interests of the institution. s.34(1).

Penalty

Breach may result in:

• Fines.

• Imprisonment.

• Removal from office. s.34(2).

Conflicts of Interest

Section 35

Directors and officers must disclose material interests in contracts with the institution. s.35(1).

Interested directors must:

• Declare the conflict.

• Withdraw from deliberations.

• Abstain from voting. s.35(4).

13. Protection of Depositors

Deposit Priority in Liquidation

Sections 58 and 59

In liquidation, deposits receive statutory priority over many other claims. s.58.

This reflects the Act's central objective of protecting depositors and maintaining public confidence in the banking sector.

Confidentiality of Customer Information

Section 63

Information relating to customers is protected and generally may not be disclosed except as authorised by law. s.63(1)-(2).

14. Insolvency, Seizure and Liquidation

Seizure of a Bank

Sections 45-51

The Central Bank may take possession of a bank where:

• Capital is impaired.

• Operations are unlawful.

• Examinations are obstructed.

• Business is conducted unsafely.

• Depositors are at risk. s.45.

After seizure, the Central Bank assumes full management and control of the institution. s.48(2).

Reorganisation or Liquidation

Sections 51-55

The Central Bank may:

• Reorganise the institution.

• Arrange new ownership.

• Merge it with another institution.

• Seek compulsory liquidation through the High Court. ss.51-55.

Key Takeaways for Businesses, Investors and the Public

For Businesses

• Ensure dealings are conducted only with licensed banks.

• Understand lending and financing restrictions affecting banking partners.

• Be aware that banks are heavily regulated and monitored by the Central Bank.

For Investors

• Acquiring more than 10% control generally requires regulatory approval.

• Assess capital adequacy, governance structures and compliance records before investing.

• Regulatory intervention powers can significantly affect investment value.

For the Public

• Depositors benefit from extensive statutory protections.

• Customer information is protected by law.

• The Central Bank has authority to intervene early when banks become unsafe or unsound.

• Depositor claims receive preferential treatment in liquidation.