RECENT DEVELOPMENTS IN SUPERVISION OF FINANCIAL INSTITUTIONS
1. Revised minimum capital requirement
The RBM revised minimum paid up capital for banks and other financial
institutions (leasing companies and discount houses) to K850.0 million
and K250.0 million respectively. Therefore, all existing banks and
other financial institutions whose paid up capital was less than
K850.0 million and K250.0 million respectively are required to meet
this new requirement which took effect on 1 January 2009 and exiting
banking institutions were given a moratorium of 18 months from the
2. Credit Referencing
In a bid to improve credit risk assessment and preparation towards
Basle II, banks, Bankers Association of Malawi and RBM have joined
hands towards introduction of a credit reference unit. Efforts have
been made towards endaging a service provider and drafting the
enabling law. The Bill awaits enactment by Parliament.
3. Risk Based Supervision (RBS)
Pursuant to adoption of RBS by the RBM in 2007, the bank reviewed Risk
Management Programmes (RMPs) from banks, held walk through
presentations on RMPs by banks, conducted bank-wide presentations to
give feed back to banks on generic observations on their submissions,
conducted pilot risk based examinations, drafted the RBS examination
manual and officially launched RBS on 9th January 2009. The RBM also
issued guidelines on effective RMPs preparation.
4. Anti-Money Laundering and Combating of Terrorism (AML/CFT)
There have been several anti-money laundering and combating the
financing of terrorism (AML/CFT) developments in the Reserve Bank of
Malawi. The Reserve Bank of Malawi through Bank Supervision
Department issued a Customer Due Diligence Directive (CDD Directive)
in 2005 under the Banking Act. The Directive requires the banks to,
inter-alia, appoint Anti-Money Laundering Compliance Officers, put in
place Know Your Customer (KYC) policies and report any suspicious
transactions to the Reserve Bank of Malawi. With the enactment of the
Money Laundering, Proceeds of Serious Crime and Terrorist Financing
Act, 2006 (ML & TF Act), the obligations placed on the banks through
the Directive have been amplified.
In May this year considering the enormous task of monitoring AML/CFT
compliance in the financial sector, the Reserve Bank through Bank
Supervision Department created a separate section within the
department to monitor compliance with AML/CFT obligations placed on
the banks through the CDD Directive and the AML/CFT Act.
NUMBER OF COMMERCIAL BANKS IN MALAWI
As at end December 2008, the banking sector comprised eleven banks.
These are National Bank of Malawi, Standard Bank Limited, First
Merchant Bank Limited, NBS Bank Limited, INDEbank Limited, NEDBANK
Malawi Limited, Malawi Savings Bank Limited, Opportunity International
Bank of Malawi Limited, ECOBANK (formerly Loita Bank), FDH Bank
Limited and International Commercial Bank (ICB). FDH Bank and ICB
were licensed in 2008. In addition, First Merchant Bank owns a
subsidiary, Leasing and Finance Company.
RULES ON APPOINTMENT OF COMMERCCIAL BANK DIRECTORS
It is not correct that RBM changed the rules on appointment of directors.
In approving appointments for commercial bank directors, the RBM is
guided by the Banking Act (1989), Directive on Appointment of New
Directors and Senior Management Officials (issued in March 2006) and
International Standards pertaining to Fit and Proper Test for
Directors embedded in the Core Principles for Effective Supervision.
In May 2009, all banks, discount houses and the leasing company were
issued with a circular letter requesting them to regularise positions
of any directors, and senior management officials who were already in
those positions when the Directive was issued and were not vetted
under the said Directive. Financial institutions were given 12 months
from May 2009 to fully comply with the requirements of the Directive.
It is normal that after a thorough assessment, the Bank rejects names
of persons proposed as directors of commercial banks who fail to pass
the fit and proper test. Their side is heard from the information
submitted by their banks. We are however not able to provide you will
details and number of those rejected.