Reserve Bank of Malawi imposes punitive penalties to banks

The Reserve Bank of Malawi (RBM) has come up with punitive administrative penalties targeting financial institutions which, among others, will see commercial banks paying up to fifty million Kwacha for contravening the Financial Services Act.

RBM through Registrar of Financial Institutions is expected to start enforcing the charges and penalties by 1st October, 2015 with main focus of ensuring that  financial institutions especially banks are complying with  the provisions of the Financial Services Act and the directives of the Central Bank.

According to the schedule of charges and penalties which Nyasa Times has a copy, banks are expected to pay between K25 million and K40 million on offences related to failure to submit information, K40 million for large exposure and credit concentration limits related offences and between K30 million and K40 million on offences related to transactions banks have with related parties.

For instance, commercial banks are expected to pay a K40 million penalty where a bank’s exposure to an insider or related party exceeds 10 percent of core capital, and K30 million where a credit facility to an insider or related party is not secured by collateral which is enforceable.

The banks are expected to part with K40 million in situations where they happen to grant a credit facility to an insider or a related party while another credit facility to that person is non-performing.

RBM has also imposed punitive penalties on banks whose directors or senior management officials own shares directly or indirectly in a credit and on banks whose directors or senior management official serve on the board of a credit reference bureau.

And the banks are also expected to pay K40 million for having a politically exposed person serving as director or senior management official without Registrar of Financial Institutions’ approval.

The Central Banks has also taken into consideration the conduct of commercial banks which
have not cooperated with the country’s Credit Reference Bureaus (CRBs).

According to the schedule of the charges and punitive administrative penalties, commercial banks will be paying K25 million for failing to submit information including material changes on credit history of the bank’s borrowers and customers to a Credit Reference Bureaus.

There has been a complaint by CRBs that most banks were reluctant to cooperate in submitting information despite the enactment of Credit Reference Bureaus Act in 2010.

Meanwhile, government has issued an order demanding all its agencies to start cooperating with the country’s credit reference bureau by providing them with information to help them in the mobilization of data for their credit reference services.

According to a directive from the Office of the President and Cabinet (OPC), all local councils and government entities should start cooperating with Credit Reference Bureaus (CRBs) in the country.

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