Bank Run: Ivory Coast Banks, Stock Exchange Close

Ivory Coast’s financial system is grinding to a halt with banks closing and the stock market suspended, sparking a run on the banks left open as the West African nation’s political crisis drags on.

(Bloomberg) — Ivory Coast’s financial system is grinding to a halt with banks closing and the stock market suspended, sparking a run on the lenders left open as the West African nation’s political crisis drags on.

Standard Chartered Plc, Citigroup Inc., BNP Paribas SA and Societe Generale SA have all closed their units in the world’s top cocoa producer because of security fears after a disputed Nov. 28 vote left the country with two rival administrations. Bank Atlantique Cote D’Ivoire, the country’ second-biggest bank, said on its website that it has suspended its operations.

The Central Bank of West African States has demanded banks in the region halt all transactions with its agencies in Ivory Coast after the offices were seized by Laurent Gbagbo, the incumbent president. Alassane Ouattara, the internationally recognized winner of the election, has also called on companies to stop paying taxes to Gbagbo’s administration and told coffee and cocoa shippers to halt exports for one month in a bid to starve Gbagbo of funds.

“This is a significant setback for Gbagbo’s administration,” Samir Gadio, a London-based emerging market strategist at Standard Bank Plc, wrote in an e-mailed note yesterday. “The financial system has virtually come to a standstill, which is likely to erode the regime’s base of support going forward, especially if public and private sector salaries are not serviced later this month.”

Gbagbo’s administration will take “judicial proceedings” against the local units of BNP and Citigroup for shutting their local branches, the Justice Ministry said on Feb. 15. That may further alienate global investors after the government defaulted on $2.3 billion of Eurobonds this month.

Long Lines

Societe General and BNP together hold about a third of all deposits in Ivory Coast, according to data from the Professional Association of Banks and Financial Establishments of Ivory Coast.

Clients formed long lines at the banks that were left open in the commercial capital of Abidjan today. About 200 people were crammed into the foyer of Ecobank Transnational Inc., with a queue running out onto the street.

“It’s getting difficult as we don’t know what will happen next with the other banks,” Aissata Diomande, a 39-year-old lawyer in the line, said. “I’m personally convinced that all the other banks will close one by one. I’m trying now to withdraw some cash firstly to take care of my family.”
No Liquidity

Abou Traore, a 31-year-old police officer, said he tried to close his account and withdraw all his money at a branch of SGBCI, the unit of France’s Societe Generale in Ivory Coast. The lender denied the request, he said, “because it doesn’t have enough liquidity.” The gate to a cash machine outside its main branch was also locked.

Banque Internationale pour l’Afrique Occidentale wasn’t serving waiting customers today.

“Given the increasingly challenging operating environment in the Ivory Coast, we have decided to temporarily suspend our operations there until it is safe to reopen,” Shaun Gamble, a London-based spokesman at Standard Chartered, said by e-mail yesterday.

Gbagbo’s administration said the bank closures wouldn’t stop it paying government employees for February. “There is no risk the salaries will not be paid,” Budget Minister Justin Kone Katina said in remarks broadcast on Radiodiffusion Television Ivorienne today.
In Default

The Bourse Regionale des Valeurs Mobilieres, where companies from eight West African nations trade their shares, was closed “until further notice” following the Feb. 9 seizure of its offices by Gbagbo’s administration, according to a statement issued Feb. 14 in Ouagadougou, Burkina Faso. Gbagbo called the move to halt trading on the market “void,” according to an e-mailed statement yesterday.

The nation failed to make a $29 million interest payment on its Eurobonds on Jan. 31 after a grace period, prompting the London Club group of commercial bank creditors to declare an “event of default” on Feb. 1.

The 2.5 percent note maturing in December 2032, sold in April 2010, fell to a record low of 37.09 cents on the dollar on Jan. 28, according to Bloomberg data. The bond traded at 38.833 cents today.

Ivory Coast’s economy, once the second-biggest in West Africa after Nigeria, may contract in the first half of the year as the crisis deepens, Gadio and other Standard Bank researchers said last month. The European Union levied trade and travel sanctions on Gbagbo, his supporters, and institutions that aided his bid to stay in power last month.
Violence and Negotiations

At least 300 people have been killed in post-election violence, according to the United Nations. Ouattara remains holed up in the Golf Hotel in Abidjan, where he is protected by UN peacekeepers. Gbagbo retains control over the army, state television and over public institutions.

The UN yesterday authorized the deployment of three more infantry companies and one aviation unit, including three armed helicopters, for its peacekeeping mission in Ivory Coast, according to Deutsche Presse-Agentur.

South African President Jacob Zuma will visit the country on Feb. 21 as part of attempts by the African Union to resolve the political stalemate, South Africa’s International Relations Minister Maite Nkoana-Mashabane told reporters in Cape Town today.

“We hold no brief for any faction in Ivory Coast,” she said. “From the past 10 days I have been receiving delegations from both sides. Both sides have confirmed that they believe South Africa is an honest broker.”

On Dec. 8, South Africa’s government issued a statement urging Gbagbo to step down, after the AU recognized his rival as president. Nkoana-Mashabane declined to say whether South Africa still recognized Ouattara as Ivory Coast’s rightful leader.

By Olivier Monnier and Baudelaire Mieu
Feb 17, 2011 6:38 PM GMT+0100

Source: Bloomberg

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