New Bank Licensing Criteria to Ensure Stability and Safety

In a bid to enhance banking stability and safety, the Malawian government has introduced new licensing criteria for banks operating in the country. The new regulations, which came into effect recently, aim to ensure that banks are effectively managed and have sufficient capital to operate safely.

Key Requirements for Banking Licences

• Banks must demonstrate that they have a minimum of two executive officers who will be responsible for managing the banking business.
• Banks must show that they have adequate start-up capital as stipulated in the Registrar’s directive on capital.
• Banks are prohibited from engaging in any business other than the one designated in their licence, to prevent diversification into unrelated businesses and reduce the risk of instability.

Suspension or Revocation of Licence

In a move to ensure that banks are held accountable for their actions, the government has introduced provisions for the suspension or revocation of banking licences. If a bank’s licence is suspended or revoked:

• The Registrar will have the power to give written directions to the bank regarding the disposal of its assets and entering into specific transactions.

Register of Banks

The Registrar will maintain a register of banks in Malawi, which will include separate parts for each class of banking business. The Register will be published in the Gazette and updated annually.

Prudential Supervision

The government has also introduced provisions to ensure prudential supervision of banks operating in Malawi. Under these regulations:

• Every bank is required to maintain adequate capital for the conduct of its business.
• The Registrar may prescribe higher ongoing capital requirements for specific banks if necessary.
• Banks are prohibited from declaring cash dividends or making transfers from surplus funds that would result in a breach of their capital adequacy requirements.

Submission of Periodic Returns

Under the new regulations, banks are required to submit periodic returns and other information to the Registrar as may be required. The format and frequency of these returns will be determined by the Registrar’s directive.

Supervision of Banks and Financial Institutions

The Registrar has been granted powers to:

• Periodically examine or cause to be examined the business of any bank in order to determine whether it is in a sound financial condition and complies with relevant regulations.
• Carry out examinations on a consolidated basis for affiliates, associates, holding companies, or subsidiary companies that control banks operating in Malawi.

The new licensing criteria and prudential supervision regulations are aimed at ensuring the stability and safety of the banking sector in Malawi. The government hopes that these measures will help to build trust among depositors and other stakeholders in the industry.