ABIDJAN/DAKAR, Feb 18 (Reuters) - Ivory Coast will re-open branches of two major French banks on Monday after announcing it was nationalising them to avert economic meltdown, the government of disputed leader Laurent Gbagbo said on Friday. [ID:nLDE71H0QY]
Here as some questions and answers about the proposed nationalisation.
The two main banks targeted in the announcement late on Thursday were a unit of France’s Societe Generale (SOGN.PA) and French BNP Paribas’s (BNPP.PA) unit BICC.CI, both of which suspended operations this week.
The official reasoning for targeting these two banks was that they were among the oldest and biggest, and therefore essential to keep the economy functioning.
Analysts believe they were prioritised due to the large number of civil servants and soldiers who hold accounts with the banks and who will be eagerly awaiting their monthly salaries in coming days.
Also mentioned as possible targets were Standard Chartered (STAN.L) and “City Bank”, an apparent reference to Citibank (C.N). A number of other international banks which also closed this week were not immediately targeted for nationalisation.
Gbagbo government spokesman Ahoua Don Mello said staff at the two French banks would meet government officials on Friday and open for business on Monday “by all means necessary”.
Don Mello said the bank employees would now work for the government and there was sufficient expertise in-country to overcome technical issues for making the banks operate.
But sources with knowledge of the Ivorian banking industry said the reality was likely to be more complicated.
A lot of the major banks have already evacuated senior staff who would have access to operating systems. Even if that is not the case operations in-country can also be disabled remotely.
This would make it virtually impossible for the government to operate them, one of the sources said. It is not clear whether the real-time settlement system between banks in-country will also function, the source added.
Unlikely. The Ivorian banking system’s woes stretch back to the Dec. 2010 move by the West African regional central bank BCEAO to shut down its Ivorian operations in an attempt to cut Gbagbo’s access to funds and squeeze him from power.
After initially being able to circumvent restrictions by using loyalists to retain his access to the internal IT system -- allowing his camp to break into the vault and set up a parallel clearing network -- Gbagbo’s options are running out.
Clients who scrambled to withdraw cash from their accounts this week are unlikely to start putting deposits back into the banks until they are really convinced of a return to stability.
The first big test will be whether and how civil servants and soldiers receive salaries at the end of the month.
Cheques are no longer being accepted, Ivorians are hoarding cash and money-transfer systems like Western Union have also ground to a halt. Albeit with a hint of humour, some are talking about the possibility of moving to a barter economy.
Gbagbo’s government insists it still has allies, especially amongst emerging nations in Latin America, Asia and elsewhere in Africa. But it is not clear how these nations will actually be able to help free up the system.
The idea of exiting the CFA franc zone and setting up a new currency has been floated by some but analysts have warned of the likelihood of rampant inflation.
The economic shutdown is proof that life under Gbagbo is not going to be business as usual. But the former history teacher has, in the past, been the master of portraying himself as a defender of Ivory Coast’s interests against foreign powers.
The impact of the move on the cocoa sector is likely to be limited: even if it facilitates some of the financial transactions underpinning the industry, EU sanctions and the fact that exporters have followed rival presidential claimant Alassane Ouattara’s call for a ban on supplies, means cocoa will still not get to world markets.
Ouattara and those powers behind the sanctions are being blamed for ruining the country.
But Ivory Coast watchers note that even during the worst of the crisis so far, the country’s civil servants have always been paid. A wage-less end of the month would take the country into uncharted territory.
Ouattara’s camp is calling for an Egypt-style revolution but given the bloodbath that accompanied the last efforts to protest on a large scale in December, it not yet clear if the calls will be heeded. (Writing by David Lewis; editing by Giles Elgood)