House refers Banking Bill to committee

House refers Banking Bill to committee

Parliament yesterday referred to the Budget and Finance Committee a Banking Bill seeking to amend Chapter 44:01 of the Banking Act to provide more options for dealing with failing banks and enhance the legal framework for early intervention on banks.

According to the Bill, amending Chapter 44:01 will give more powers to the Registrar of Financial Institutions to make some decisions on failing banks, which currently require court orders.

Speaking when he presented the Bill in Parliament yesterday, Minister of Finance Sosten Gwengwe said banks are highly vulnerable to loss of confidence and contagion risks; hence, the need to take into account broader public policy and financial stability objectives that protect people who deal with banks.

Presented the Bill yesterday: Gwengwe

Reads the Bill in part: “The Bill aims at broadening legal powers and techniques for bank resolutions, provide procedures that promote timely resolutions of failing banks, increase protection for bank depositors through  a two-tiered depositor preference framework that favours small-scale depositors and striking balance between due process and administrative or judicial review rights of stakeholders on the one hand and and good financial stability which is in the interest of the public on the other hand.”

But responding to the Bill on behalf of the Democratic Progressive Party (DPP), parliamentarian Ralph Jooma said while his party supports the objectives of the Bill as having an interest to protect both the bank and the depositors, it is worried about the powers conferred on the Registrar.

“It would help much if the Bill was drafted in good faith, but as it is, some powers given to the Registrar maybe abused by either punishing some specific banks while protecting others.

“So, we strongly recommend that the Bill goes back to the committee of Budget and Finance,” he said.

The Bill gives powers to the Registrar to facilitate mandatory recapitalisation of failing banks through acquisition of additional shares by existing shareholders or offer shares to new investors.

It also gives powers to the Registrar to carry out a purchase and acquisition transaction involving the transfer of assets and liabilities of a failed bank without requiring prior approval of shareholders.

It also empowers the Registrar to merge failing banks without requiring prior approval of shareholders, among others. n

The post House refers Banking Bill to committee appeared first on The Nation Online.

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