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 effective date.
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