MALAWI RESERVE BANK ACT: A MAJOR OVERHAUL

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The Malawian government has introduced significant reforms to the Reserve Bank Act aimed at strengthening the country’s financial sector. The new laws aim to ensure the bank remains solvent and efficient in its operations.

CAPITAL INCREASE AND GOVERNMENT SUBSCRIPTION

• The Act allows for an increase in the capital of the Reserve Bank, with the government being required to subscribe and pay up at par the amount of such increase.
• This is aimed at ensuring the bank’s solvency at all times.

BOARD OF DIRECTORS

• The Board of Directors will consist of the Governor, Deputy Governors, and other directors appointed by the President for a term of three years.
• Directors must have a background in economics, finance, financial markets, or other relevant fields to ensure the board has an appropriate range of skills and experience.

ELIGIBILITY FOR APPOINTMENT

• The Act outlines those who are not eligible for appointment as directors, including:
  • Members of Parliament
  • Financial institution employees
  • Controlling parties of financial institutions
  • Individuals with a history of bankruptcy, fraud, or similar offenses

RESIGNATION AND TERMINATION OF DIRECTORS

• A director may resign by giving one month’s notice in writing to the President.
• The appointment of a director shall immediately terminate if they become disqualified or engage in activities that conflict with their duties as a director.

MINISTERIAL POWERS

• The Minister may, on the recommendation of the Board, amend the Second Schedule, which outlines the powers and functions of the Reserve Bank.

EFFECTIVENESS AND EFFICIENCY

• The Act emphasizes the importance of ensuring the operations, administration, and management of the bank are conducted in a proper, efficient, and effective manner.
• The Board shall oversee these activities to ensure compliance with this requirement.

These reforms are expected to enhance the stability and efficiency of the Malawian financial sector, ultimately benefiting the country’s economy.

Source: Reserve Bank of Malawi Act, 2011.