The Banking Act of Malawi: Regulatory Framework for Banks

Overview

The Banking Act of Malawi provides a comprehensive regulatory framework for banks operating within the country. The Act outlines the requirements for licensing, conditions for licensing, limitation on shareholding, prudential supervision, submission of periodic returns, and supervision of banks and financial institutions.

Licensing

• Only bodies corporate can be licensed as banks in Malawi.
• The Registrar has discretion to determine which entities are engaged in banking business.

Conditions for Licensing

• Applicants must have adequate capital.
• Competent management is required.
• Proper internal control systems must be maintained.
• Compliance with sound principles of corporate governance is necessary.

Limitation on Shareholding

• Individuals or groups that do not meet the “fit and proper” criteria may be restricted from owning or controlling a bank.

Prudential Supervision

• The Act emphasizes the importance of prudential supervision.
• Requirements for capital funds and minimum capital ratios must be met.
• Restrictions on cash dividends are in place to ensure banks maintain sufficient capital adequacy.

Submission of Periodic Returns

• Banks are required to submit periodic returns to the Registrar as specified by a Registrar’s directive.
• Failure to comply can result in administrative penalties.

Supervision of Banks and Financial Institutions

• The Registrar has authority to examine or cause examinations to be conducted on banks to ensure compliance with regulatory requirements.

Purpose of the Legislation

This legislation aims to safeguard depositors, maintain public confidence, and promote the stability of the financial system by regulating banking practices and ensuring that banks operate in a safe and sound manner.