Financial Crime World

Eswatini Financial Institutions: New Regulations Introduced

The Central Bank of Eswatini has introduced new regulations for financial institutions operating in the country. These regulations aim to ensure that these institutions operate in a safe and sound manner, while also promoting financial stability and consumer protection.

Restrictions on Purchase of Land and High-Risk Financial Services

  • Regional and small financial institutions are restricted from purchasing land or any interest in it, except as necessary for conducting their business.
  • They are also prohibited from undertaking high-risk financial services activities such as distributing mutual fund units or pension products.

Branch Expansion Restrictions

  • Regional and small financial institutions are not allowed to expand their branches in the initial three years of operations.

Capitalization and License Fee

  • Start-up capital for regional, micro finance, and small financial institutions must be at least E8 million and maintained at all times.
  • A minimum capital adequacy ratio of 15% of risk-weighted assets is also required. The capital adequacy ratio will be computed under the Basel Committee’s standardized approaches.

Foreign Shareholding Restrictions

  • The aggregate foreign shareholding in regional or small financial institutions must not exceed 40% at all times, subject to qualifying criteria set out in the policy.

Restricted License Banks (RLBs)

  • The Central Bank of Eswatini will allow licensing of financial institutions that do not intend to carry on full-scope “banking business” but only operate restricted banking activities.

Wholesale Banking

  • Wholesale banks must be majority owned by Swati individuals or an Eswatini-owned parent company, with foreign shareholding limited to 49%.
  • The applicant must have a minimum of E100 million in consolidated assets and meet other criteria set out in the policy.
  • Wholesale banks may transact any banking business with approved financial institutions and persons, subject to certain restrictions. They are also allowed to issue Eswatini bonds and negotiable certificates of deposit, subject to certain conditions.

Capitalization

  • Start-up capital for wholesale banks must be at least E30 million and maintained at all times.

The new regulations aim to ensure that financial institutions operating in Eswatini operate in a safe and sound manner, while also promoting financial stability and consumer protection.