Awwal 14, 1432 H/Feb 17, 2011, SPA -- Ivory Coast's biggest bank, a unit of Societe Generale, suspended operations on Thursday, the latest in an exodus of foreign banks that is turning a political crisis into financial meltdown, according to Reuters. Shutters were down on branches across Abidjan, the main city, while agencies still open were swamped with customers trying to withdraw cash. Separately, cocoa farmers marched on the Ivorian offices of the European Union, whose sanctions on regulators and ports have contributed to the shutdown. The financial system in the world's top cocoa grower is on the brink of collapse as a result of a post-election power struggle between incumbent Laurent Gbagbo and rival Alassane Ouattara that is entering its third month. Gbagbo has defied international pressure to step down after U.N.-certified results showed Ouattara won a Nov. 28 poll. But he has been cut off from the West African central bank and sanctions aimed at squeezing his finances are kicking in. The election was meant to reunite a country that has been divided since a 2002-3 civil war and to spur investment. But the violent stand-off, which has killed some 300 people according to the United Nations, has merely deepened divisions. Societe Generale became the fifth bank to close after fellow French bank BNP Paribas's Ivorian unit, Citibank, Nigeria's Access Bank and Standard Chartered all suspended operations this week. Societe Generale and BNP Paribas between them ran more than two thirds of the banking system. Banks cited security concerns and problems with liquidity and clearing cheques. "We faced, on the one hand, the impossibility of making clearing exchanges function normally; on the other, the impossibility of provisioning our tills in the short term," the Societe Generale statement said. Sanctions and the decision by West African leaders to cut Gbagbo off from the BCEAO central bank were meant to sever his access to funds but the shuttering of banks will hit all levels of society in the country, with unknown consequences. "I'm here to take as much as possible," said Hamed Yao, a 31-year-old book seller, at an Ecobank branch where a security guard tried to restrain an angry, shouting crowd but was overwhelmed as clients stampeded in. "This is all politics and I don't see why we should suffer because of politicians. I don't know if it is (Ggagbo's or Ouattara's) fault, but I know it is Ivorians who suffer." Several hundred cocoa growers, chanting anti-European slogans, gathered at the EU offices in Abidjan and said they would burn a pile of beans in protest against EU sanctions, which have contributed to the drying up of exports and farm gate prices collapsing up-country. ICE cocoa futures rose in early trading on Thursday, edging toward Monday's one-year high of $3,444 a tonne. UNKNOWN CONSEQUENCES Gbagbo, who remains in control of the military and the state broadcaster, is likely to blame the crisis on Ouattara, who has been backed by world leaders but remains blockaded in a lagoon-side hotel, protected by U.N. peacekeepers. Standard Bank analyst Samir Gadio said on Wednesday that the closing of banks would erode Gbagbo's support, especially if salaries are not paid at the end of the month. "A practical option for Gbagbo's government would be to formally exit the CFA zone and launch an Ivorian currency as this would allow fiscal operations to be funded via central bank financing, although it would also result in an (hyper) inflation spiral and make the new unit worthless from day one," he said. In response to being cut off from the eight-nation CFA central bank, Gbagbo sent troops to seize its Abidjan branch last month and his government has threatened banks that do not sign up to its new clearing system. But in a sign Gbagbo may have been spooked by the banking exodus, planning minister Justin Kone on Wednesday night rowed back on insisting banks clear cheques through their system; some banks had refused, so as to comply with EU and U.S. sanctions forbidding cooperation with Gbagbo's government. Asked if they would consider nationalising banks that close up, he said: "We are not there yet. We await their return".
