Banking Act

This section says the Act may be cited as the Banking Act.

This section defines key banking terms used in the Act.

This section says the Act applies alongside the Financial Services Act.

Banking business in Malawi may only be conducted by a licensed bank, and the Registrar cannot license a person unless it is a body corporate.

When deciding on a banking licence application, the Registrar must consider listed matters and may interview key personnel and inspect their books and records.

Certain people cannot buy more than 10% of a bank’s shares, and bank share transfers need regulatory approval.

The Registrar must not grant a banking licence unless the bank meets the stated management and minimum capital criteria, and a bank may only carry on the business named in its licence.

If a banking licence is suspended or revoked, the Registrar may issue written directions to the bank about disposing of assets and entering transactions specified in the directions.

The Registrar must keep a register of banks and publish certain bank register information in the Gazette.

Banks must always keep adequate capital. The Registrar may require a specific bank to hold higher ongoing capital if supervisory review shows risks that justify it.

The Registrar may issue directives about bank accounting policies and related items.

A bank must not pay or declare cash dividends, transfer surplus, or increase paid-up share capital from revaluation reserves when the section’s capital requirements would be breached or are not met.

Banks must give the Registrar required information and periodic returns, and the Registrar can require related companies or controllers to provide information or records in writing.

The Registrar may inspect banks and related group entities, and banks must provide requested information or data when asked.

The Registrar may disclose section 13 information to requesting monetary, supervisory, or other regulatory authorities, including outside Malawi, if the Registrar is satisfied the information is needed for the requester’s duties.

If a bank does not appoint or get approval for an external auditor in time, the Registrar may appoint one and the bank must pay the auditor’s remuneration.

External auditors of banks must carry out specified audit duties, report certain issues to the Registrar, and cannot rely on disclaimer clauses to avoid responsibility for materially wrong or grossly misleading statements.

Every bank must satisfy the Registrar about bad debt provisions, its non-accrual interest policy for non-performing loans, and amortization of certain expenses before annual accounts are finalized, dividends are paid, and section 10 capital requirements are met.

Banks must keep records, books of account, and information in Malawi, and keep them for at least seven years from the last entry.

A licensed banking company must not buy shares in its own business, lend or advance money against those shares as collateral, or hold shares in a company that controls the bank.

If a shareholder in a privately held bank equity investment is liquidated or sells out, the equity must first be offered to existing shareholders, then to outsiders if they do not take it up.

A bank cannot do certain trading and investment activities without the Registrar’s prior approval.

The Registrar may issue directives covering bank solvency, liquidity, capital, asset/liability ratios, and restrictions on certain loans, investments, foreign currency positions, and other transactions.

Banks are restricted from making or keeping loans and credit accommodations to insiders except on non-preferential terms, within a 10% core-capital limit, and with required security and board approval.

A bank must get the Registrar’s prior written permission before carrying out certain major actions.

The Registrar may take immediate enforcement action against a bank or affiliated person if listed problems are found.

The Registrar may put a bank into statutory management or close it, and may impose a moratorium on payments to depositors and creditors.

The Registrar or appointed agent must choose and carry out a resolution action for a bank under statutory management within 12 months.

Banks need the Registrar’s prior approval before applying to the High Court for voluntary liquidation, and a bank in voluntary liquidation must stop all activities except those needed to wind up its assets and obligations.

This section gives a liquidator broad powers to manage a bank’s liquidation, but many actions need the Registrar’s approval or remain under the Registrar’s control.

The liquidator must report the bank’s custodial assets, their value, and estimated liabilities to the Registrar within five months of appointment, and must follow the Registrar’s directions when administering and distributing assets.

The liquidator must start paying depositors and creditors within 90 days after the bank’s assets-and-liabilities report is submitted, following the stated priority order.

A liquidator must keep proper financial records and record all liquidation-related transactions as prescribed by the Registrar.

Licensed banks that are companies are covered by the Companies Act winding-up rules, but not the rules that apply specifically to creditor’s voluntary winding-up.

In a winding-up, bank records relating to deposits count as prima facie evidence of depositors’ claims.

After a bank winding-up, unclaimed money must be paid into the Bankruptcy Estates Account at the Reserve Bank of Malawi, and other unreturned bank-held property must be put in the Registrar’s custody.

The liquidator’s pay and all liquidation costs must be paid from the assets of the bank under liquidation.

The Registrar may issue and amend banking directives and regulations, grant dispensations in special cases, publish and communicate them, and require banks to provide information.

If a bank does not comply with section 38 directives, the Registrar may order it to pay an administrative penalty.

Banks must report presumed abandoned items to the Registrar and transfer money deposits and other property as required; banks are relieved of liability after doing so, and a claimant may recover abandoned property by proving entitlement to a competent court.

A licensed bank may not carry on regular fiduciary business unless the Registrar expressly permits it.

A depositor who cannot sign may use a thumb impression for bank account opening, deposits, or withdrawals, if done in the presence of a bank officer.

Most non-banks in Malawi may not use “bank” or similar words in their business name unless the Registrar consents.

Only a licensed bank may advertise that it performs banking services in Malawi normally rendered by banks.

The Registrar may appoint a suitably qualified person as an additional director of a bank when it is in the bank’s or depositors’ interest.

Directors and officers of a bank must not participate in decisions or discussions where they or close relations have an economic interest, and must disclose the interest and step out of the meeting when required.

A bank’s board must be responsible for governance, business performance, control of operations, and compliance with laws and sound banking practices.

Bank directors must promptly report warning signs to the Registrar in writing, and directors generally may not hold roles with another bank in Malawi at the same time.

An executive officer of a bank must take reasonable steps to ensure compliance, accurate statements, and required information, or face an offence and an administrative penalty set by the Registrar.

Bank directors, officers, and employees must not take gifts or other value in return for helping a loan, advance, or credit facility go through.

Banks must identify customers, keep records, and promptly report suspected money laundering to the Financial Intelligence Unit. Bank directors, officers, and employees must not process transactions without reasonable identity checks or when they suspect false documents or illegal funds.

The Registrar must publish violations of the Act or the Registrar’s directives in at least two widely circulated newspapers.

If this Act conflicts with the Companies Act, this Act prevails.

A person who breaks any provision of the Act commits an offence; if no other penalty is set, conviction carries a K10,000,000 fine and four years’ imprisonment.

The Minister may make regulations, but only upon the Registrar’s recommendation.

Some existing banking licence holders are treated as holding a banking licence under this Act and the Financial Services Act, subject to section 57.

An existing financial institution that does not meet the new requirements at commencement must comply within the period set by the Financial Services Act.