Banking and Financial Services Act, 2017
This Act may be cited as the Banking and Financial Services Act, 2017, and it starts on a date appointed by the Minister by statutory instrument.
- Jurisdiction
- Zambia
- Instrument
- Act or statute
- Citation
- Act 7 of 2017
- Version
- 13 Apr 2017
- Language
- en
- Official source
- View official record ↗
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Statute overview
About this statute
This Act may be cited as the Banking and Financial Services Act, 2017, and it starts on a date appointed by the Minister by statutory instrument. This section says the Act applies to all financial service providers. This Act does not apply to the Bank, except where it expressly imposes a duty on the Bank, or to a person registered under the Money Lenders Act. If another law conflicts with this Act on banking business or financial services, this Act prevails to the extent of the conflict; but for securities regulation conflicts, the Securities Act, 2016 prevails to the extent of the conflict. The Bank issues three types of licences: banking, financial business, and financial institution licences.
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Provisions of Banking and Financial Services Act, 2017
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Part
PART I
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Short title and commencement
This Act may be cited as the Banking and Financial Services Act, 2017, and it starts on a date appointed by the Minister by statutory instrument.
1. This Act may be cited as the Banking and Financial Services Act, 2017 and shall come into operation on the date appointed by the Minister by statutory instrument. Short Title and Commence- ment - 2 Verify source ↗
3. Application of Act
This section says the Act applies to all financial service providers.
2. (1) In this Act, unless the context otherwise requires— Interpretation “ advance ” means— (a) any direct or indirect payment of monies, a loan or an extension of credit to a person or common enterprise— (i) made on the basis of an obligation of that person or common enterprise repaying the funds; or (ii) repayable from specific property pledged by, or on behalf of, a person or common enterprise; 188 No. 7 of 2017] Banking and Financial Services (b) the credit risks arising from actual claims, potential claims and credit substitutes; or (c) a commitment to extend credit or acquire a debt security or other right to payment of a sum of money; “ alternative financial service ” means a financial service that applies specific regulatory rules based on religious principles; “ associated person ” means— (a) a company in which a person is a manager or director; (b) each person that beneficially owns shares in the same company; (c) a third person that owns or exercises, or is capable of exercising, directly or indirectly, significant control over a company or person referred to in paragraph (a) or (b); (d) persons that are in a partnership; (e) persons that are both members of a voting trust or other arrangement relating to shares, except that this paragraph does not apply to a financial business where— (i) two or more persons are affiliated if the persons are companies that are controlled by the same person; and (ii) a company is the subsidiary of another company and if more than fifty percent of the issued voting shares of the company, other than qualifying directors’ shares, are owned directly or indirectly by the other company; or (f) the spouse, parent, child, brother or sister of a person, or of the person’s parent, child, brother or sister; and “ associate and association ” shall be construed accordingly; “ articles of association ” has the meaning assigned to the term in the Companies Act, 2017; “ bank ” means a company authorised to conduct banking business in accordance with this Act; “ Bank ” means the Bank of Zambia established in accordance Act No. of 2017 Cap. 1 with the Constitution; “ banking licence ” means a licence specified in section 5 and granted in accordance with section 8; “ banking business ” means— Banking and Financial Services [No. 7 of 2017 189 (a) receiving deposits, including chequeing and current ac- count deposits, and the use of the deposits, either in whole or in part, for the account and at the risk of the person carrying on the business to make loans, advances or investments; (b) providing financial services; and (c) any custom, practice or activity, prescribed in rules issued by the Bank, as banking business; “ beneficial owner ” means an individual who— (a) exercises control over a financial service provider, legal person or arrangement; or (b) owns or controls a customer or the person on whose behalf a transaction is conducted and, where two or more persons are associated through the beneficial ownership of shares in the same company, each person shall be a beneficial owner of the aggregate number of shares of the company; “ board ” means the governing body of a financial service provider; “ body corporate ” has the meaning assigned to the word in the Companies Act, 2017; “ borrower ” includes a person who becomes indebted to a financial service provider due to a guarantee made for the repayment of an amount owed by another person; “ branch” means the permanent premises, other than the head office, at which a financial service provider conducts business in or outside Zambia; “ branchless banking” means the provision of banking services or financial services without relying on physical branches; “ bridge bank ” means an institution created by the Bank to temporarily operate a failed bank or financial institution until a buyer is found for its operations; “ capital adequacy ” means the legal capital prescribed by the Bank in terms of money or assets invested or available for investment in the business that is sufficient for the sustainability of the financial service provider; “ capital conservation buffer ” means the mandatory capital that financial institutions are required to hold, in addition to minimum capital requirements, as prescribed, to be drawn down when losses are incurred during periods of stress; Act No. of 2017 190 No. 7 of 2017] Banking and Financial Services Act No. of 2017 “chief executive officer” means the person engaged by a financial service provider who is responsible, under the immediate authority of the board, for the conduct of banking business or financial services for the financial service provider; “ chief financial officer ” means a person responsible for maintaining the accounts and accounting records of a financial service provider; “ chief risk officer ” means a senior employee of a financial service provider with distinct responsibility for risk management functions and the financial service provider’s enterprise-wide risk management framework; “ company ” has the meaning assigned to the word in the Companies Act, 2017; “ common enterprise ” means an undertaking of two or more persons with an equal right to direct and benefit from the undertaking and where the negligence of any of the persons may be imputed to the others; “ common equity tier one ” means the sum of the following: (a) paid-up common shares issued by a financial service pro- vider; (b) share premium, resulting from the issue of common shares; (c) retained earnings; (d) accumulated comprehensive income and other disclosed reserves; (e) common shares issued by consolidated subsidiaries of the financial service provider and held by a third party that meets the criteria prescribed by the Bank, for inclusion in common equity tier one capital; and (f) regulatory adjustments, applied in the calculation of the common equity tier one, as prescribed by the Bank; “ compliance officer ” means a senior employee of the financial service provider with overall responsibility for coordinating the identification and management of the financial service provider’s compliance risk and supervising the activities of the other employees responsible for the compliance functions of the financial service provider; “confidential information” means information that is not pub- lic, regarding— Banking and Financial Services [No. 7 of 2017 191 Act No. 24 of 2010 Act No. of 2017 (a) the nature, amount or purpose of any payment made by or to a person; (b) the recipient of a payment made by a person; (c) the assets, liabilities, financial resources or financial con- dition of a person; (d) the business or family relations of a customer; or (e) any information of a personal nature that the customer disclosed, in confidence to the financial service provider; “ consumer ” has the meaning assigned to the word in the Competition and Consumer Protection Act, 2010; “ control ” means the control of a financial service provider by a person that – (a) beneficially owns more than one half of the issued share capital of the company; (b) is entitled to cast a majority of the votes that may be cast at a general meeting of the company, or has the ability to control the casting of a majority of those votes, either directly or through a controlled entity of that person; (c) is able to appoint or to veto the appointment of a majority of the directors of the company; (d) is a holding company and the financial service provider is a subsidiary of that company as provided for in the Companies Act, 2017; or (e) has the ability to significantly influence the management, policy and affairs of the financial service provider in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in paragraphs (a) to (d); “ corporate ” means a legal entity, including a company or body corporate, that is separate and distinct from its owners and which is recognised as such by law and acts as a single entity; “ corporate restructuring transaction ” means a merger, take- over, amalgamation, reconstruction or acquisition where an entity, directly or indirectly, acquires or establishes control over the whole or part of the business of a financial service provider or where two or more financial service providers and another entity agree to adopt arrangements for common ownership or control over the whole or part of the business of a financial service provider, and includes such arrangements by an entity outside Zambia which affect a financial service provider in Zambia; 192 No. 7 of 2017] Banking and Financial Services “ counter cyclical capital buffer ” means an amount of capi- tal prescribed by the Bank to be maintained by banks and financial institutions where there is excessive buildup of credit that is likely to lead to a system wide risk; “ Court ” means the High Court of Zambia; “ credit facility ” includes an advance, loan, financial guaran- tee or any other liability incurred by a person; “ customer identification data ” means— (a) in the case of a natural person, the person’s (i) name, including any forename or maiden name; (ii) permanent address; (iii) telephone number, fax number or email address; (iv) date and place of birth; (v) nationality; (vi) occupation or public office held and the name of the employer; (vii) official personal identification number or other unique identifier contained in a valid official document that bears a photograph of the per- son; (viii) bank or other type of account and the nature of the relationship the person has with a financial service provider; and (ix) signature; and (b) in the case of a corporate, that corporate’s— (i) registered name; (ii) principal place of business; (iii) mailing address; (iv) contact telephone, fax number or electronic mail address; (v) official identification number, such as the tax identification number or official registration number; (vi) documents such as the original or certified copy of the certificate of incorporation, registration, articles of association or other internal governing rules confirming the legal existence of the ac- count holder; and Banking and Financial Services [No. 7 of 2017 193 (vii) board resolution to open an account and the identification documents of the persons authorised to operate the account.; “deposit” means— (a) an amount of money received by a bank or financial institution in the ordinary course of business that— (i) the bank or financial institution may transform into assets at its own risk; (ii) is repayable on demand or at a specified or unspecified date, or on terms agreed to, by, or on behalf of, the person making the payments; (b) an outstanding draft, a cashier’s cheque, money order or other officer’s cheque issued by the bank or financial institution and drawn on a customer’s funds for any purpose, in the ordinary course of business; or (c) such other obligations of a bank or financial institution as the Bank may prescribe by rules issued in accordance with this Act; excluding electronic money and instruments issued by a bank or financial institution in respect of an advance or for the purpose of fulfilling a payment for goods supplied or services rendered to the Bank; “ Deputy Registrar ” means a person holding office or acting as a Deputy Registrar of Financial Service Providers appointed in accordance with this Act; “ director ” means a natural person who holds office as a member of a board; “ discretionary payments ” means any payments or distributions, other than dividends, that are within the discretion of the financial service provider to make and, if not paid by the financial service provider, are not an event of default, including staff bonuses; “ equity interest in a person ” means (a) in the case of a company, any share issued by a company, the terms of which entitle the registered holder or bearer to a share in the profits of the company; or (b) in the case of a partnership, association or other body of persons acting in concert, any right to share in the profits of that partnership, association or other body of persons acting in concert; 194 No. 7 of 2017] Banking and Financial Services “ equity interest in a property or undertaking ” means an ownership interest, and includes any right to share in the profits of the operation or proceeds of disposition of the property or undertaking; “ financing ” means the act or process of raising or providing funds; “ fit and proper requirements ” means the criteria set by the Bank in accordance with section 41 and as the Bank may prescribe; “ financial business ” means a body corporate that conducts a financial service business, excluding acceptance of deposits; “ financial business licence ” means a licence specified in section 5(b) and granted in accordance with section 8; “ financial derivative ” means a contract between two or more parties whose value is based on an agreed upon underlying financial asset, index or security; “ financial institution ” means a company, other than a bank, providing a financial service; “ financial institution’s licence ” means a licence specified in section 5(c) and granted in accordance with section 8; “ financial sector ” means the subsector of the economy concerned with or related to financial, banking and monetary matters and provision of banking and financial services to commercial and retail customers including banks, investment funds and capital markets; “ financial service ” means any one or more of the following services: (a) commercial or consumer financing services; (b) brokering; (c) factoring, with or without recourse; (d) finance leasing; (e) financing of commercial transactions, including forfeiting; (f) issue and administration of credit cards, debit cards, traveller’s cheques or banker’s drafts; (g) issue of guarantees, performance bonds or letters of credit, excluding those issued by insurance companies; (h) lending on the security of, or dealing in, mortgages or any interest in real property; Banking and Financial Services [No. 7 of 2017 195 (i) payment of cheques or other demand orders drawn or issued by customers and payable from deposits held by the payer; (j) purchase and sale of foreign exchange; (k) issue of debentures and money market instruments; (l) the acceptance of deposits; (m) issue of building society and mutual society shares, with characteristics similar or identical to deposits; (n) venture capital funding; (o) micro-financing; (p) development financing; and (q) any other service that the Bank may designate, excluding the underwriting, marketing or administration of contracts of insurance or reinsurance; “ financial service provider ” means a bank, financial institution or financial business; “ foreign financial service provider ” means a financial service provider that is not incorporated in Zambia; “ foreign company ” has the meaning assigned to the word in the Companies Act, 2017; “ insider ” means— (a) an officer, director or principal shareholder of a bank or financial institution; (b) a person who participates or has the authority to participate in major policy making functions of a bank or financial institution, whether or not employed by the bank or financial institution; (c) a bank or financial institution in which a person referred to in paragraph (a) or (b) owns, directly or indirectly, alone or with one or more other persons specified in the paragraphs, more than twenty percent of the shares; or (d) a company in which a bank or a financial institution owns more than ten percent of the outstanding shares; “ insolvency ” means a situation where a financial service provider — (a) is unable to pay debts as they fall due; (b) has assets that are insufficient to meet liabilities; or (c) has regulatory capital which is below the prescribed minimum; Act No. of 2017 196 No. 7 of 2017] Banking and Financial Services Act No. of 2017 Act No. of 2017 “ licence ” means a banking licence, financial institution li- cence, or financial business licence as the case may be; “ licensee ” means a financial service provider holding a li- cence; “manager” means an officer of a financial service provider who is in a position to control, direct or influence decisionmaking in a matter relating to banking business or financial services; “ meeting ” has the meaning assigned to the word in the Companies Act, 2017; “merchant banking” includes the underwriting of securities for corporations, advising on and arranging finance for mergers and takeover bids, the financing of foreign trade by accepting bills of exchange, underwriting new issues and investment management; “ money circulation scheme ” means a plan, arrangement, agreement or understanding, between two or more persons that involves the pooling and distribution of funds by recruitment of subscribers, and which, for its continuous existence and realisation of its benefits, substantially depends on the incremental recruitment of subscribers for an unspecified period; “ money market instrument ” means a negotiable instrument with an original term to maturity of three hundred and sixtyfive days or less; “ name ” means the name by which a financial service provider is incorporated as provided by the Companies Act, 2017; “ nominee shareholder ” means a person whose name appears on a company’s register as the registered shareholder but who holds the shares on behalf of another person; “ nonperforming loan ” means a loan in respect of which payment of principal or interest is in arrears for more than ninety days; “ physical presence ” means the physical location of a financial service provider within Zambia, or the control of the financial service provider; “ practitioner ” has the meaning assigned to the word in the Cap. 30 Legal Practitioners Act; “ primary capital ” means the sum of the— (a) common equity tier one; and Banking and Financial Services [No. 7 of 2017 197 (b) additional tier one capital, as prescribed by the Bank by rules issued in accordance with this Act; “ principal administrative office ” means the office in which the overall administration of the affairs of a financial service provider, other than its banking business or financial service business, is carried on; “ Register ” means the Register of Financial Service Providers established and maintained in accordance with section 21; “ Registrar ” means the person holding office or acting as the Registrar of Financial Service Providers appointed in accordance with this Act; “ Registrar of Companies ” means the person appointed as Registrar in accordance with the Patents and Companies Registration Agency Act, 2010; “ Registrar of Lands and Deeds ” means a person appointed as a Registrar in accordance with the Lands and Deeds Registry Act; “ regulatory capital ” means the sum of the— (a) primary capital; and (b) secondary capital, as prescribed by the Bank, in rules issued in accordance with this Act; “ related party transaction ” means a transaction in which two or more persons, by virtue of their relationship, benefit severally or jointly from funds or services arising from a transaction involving any one of them and a financial ser- vice provider; “ regulatory statement ” means directives, guidelines, orders, circulars and bulletins issued by the Bank for the efficacious implementation of this Act, regulations and rules issued in accordance with this Act; Act No. 15 of 2010 Cap.185 “ repealed Act ” means the Banking and Financial Services Cap. 387 Act, 1994; “ representative office ” means an office in Zambia belonging to or representing a foreign financial service provider; “ senior officer ” means a chief executive officer, chief financial officer, manager or other management personnel of a financial service provider; “ shell bank ” means a bank which does not have a physical presence in the country in which it is incorporated and licenced and which is unaffiliated with a regulated group to any financial service that is subject to consolidated statutory regulation supervision; 198 No. 7 of 2017] Banking and Financial Services “significant shareholding” means a direct or indirect shareholding or beneficial interest of ten percent or more of the share capital of a financial service provider, and the words “significant shareholder” shall be construed accordingly; “ subsidiary ” has the meaning assigned to the word in the Companies Act, 2017; “ tribunal ” means an ad hoc tribunal to determine appeals constituted in accordance with section 139; “ unsafe and unsound practice ” means— (a) conducting the affairs of a financial service provider in a manner that is; (i) detrimental to the stability of the financial sector or the interests of depositors and creditors; (ii) prejudicial to the interest of the financial service provider; or (iii) in contravention of this Act or any other relevant written law; (b) accumulating a high volume of nonperforming loans; (c) making secured loans based on inadequate collateral; (d) maintaining an inadequate level of reserves for loan losses; (e) maintaining an inadequate level of common equity capital; (f) advancing loans without regard to the borrower’s ability to pay; (g) maintaining inadequate liquidity; or (h) any other practice that the Bank may designate as unsafe and unsound practice; “ venture capital funding ” means risk capital given by investors to start up small or medium sized businesses with perceived high growth potential, and includes the mobilisation of funds from various sources in risky projects that would not normally attract conventional finance; “ voting shares ” means common shares in the capital of a financial service provider and any other shares of any designation or description that carry the right to vote on a resolution at a meeting; and “ Zambia Institute of Chartered Accountants ” means the Institute established in accordance with the Accountants Act, 2008. Act No. of 2017 Act No. 13 of 2008 Banking and Financial Services [No. 7 of 2017 199 (2) In this Act, unless the context otherwise provides, words and expressions used and which are not defined, but are defined in the Companies Act, 2017, the Corporate Insolvency Act, 2017, the Securities Act, 2016, or any other relevant Act, shall have the meaning assigned to them in those Acts. (1) This Act applies to all financial service providers. - 3 Verify source ↗
Application of Act
This Act does not apply to the Bank, except where it expressly imposes a duty on the Bank, or to a person registered under the Money Lenders Act.
3. (2) This Act does not apply to— (a) the Bank, except in so far as it expressly imposes a duty on the Bank; and (b) a person registered in accordance with the Money Lenders Act. - 4 Verify source ↗
Relationship with other Acts
If another law conflicts with this Act on banking business or financial services, this Act prevails to the extent of the conflict; but for securities regulation conflicts, the Securities Act, 2016 prevails to the extent of the conflict.
4. (1) Where any written law relating to, or impacting on, banking business or financial services is inconsistent with this Act, the provisions of this Act shall, to the extent of the inconsistency, prevail. Act No. of 2017 Act No. of 2017 Act No.41 of 2016 Application of Act Cap. 398 Relation- ship with other Acts (2) Despite subsection (1), where there is an inconsistency between this Act and the Securities Act, 2016 in relation to the regulation of securities, the Securities Act, 2016 shall prevail to the extent of the inconsistency. Act No. 41 of 2016 Act No. 41 of 2016 PART II LICENSING OF FINANCIAL SERVICE PROVIDERS
Part
PART II
- 5 Verify source ↗
Types of licences
The Bank issues three types of licences: banking, financial business, and financial institution licences.
5. The following licences shall be issued by the Bank in accordance with this Act: Types of Licences (a) a banking licence, which shall authorise a licensee to conduct a banking business; (b) a financial business licence, which shall authorise a licensee to conduct a financial business; and (c) a financial institution licence, which shall authorise a licensee to provide a financial service. - 6 Verify source ↗
Providing banking business, financial business or financial
A company or body corporate must not carry on banking or financial business, or provide financial services, without the required licence.
6. (1) A company shall not conduct a banking business without a banking licence. (2) A body corporate shall not conduct a financial business without a financial business licence, or provide a financial service without a financial institution licence. (3) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both. Providing banking business, financial business or financial services without licence 200 No. 7 of 2017] Banking and Financial Services Application for banking, financial business or financial institution licence - 7 Verify source ↗
Application for banking, financial business or financial
Applicants for certain banking-related licences must apply in the prescribed form, pay the prescribed fee, include specified information and documents, and may withdraw the application before it is granted or rejected.
7. (1) An application for a banking licence, financial institu- tion licence or financial business licence shall be made in the pre- scribed manner and form. (2) An application for a licence, specified in subsection (1), shall be accompanied by the prescribed application fee and shall have attached to it or contain the following: (a) articles of association or other constitutive documents; (b) physical and postal addresses of the principal administrative office; (c) permanent residential addresses of theapplicant’s directors, chief executive officer, managers; (d) name and permanent residential address of every subscriber for any class or series of shares issued by the applicant; (e) addresses of each branch proposed to be opened by the applicant and, in the case of a mobile office, the area proposed to be served; (f) full particulars of the business it proposes to conduct; (g) amount of the applicant’s capital; and (h) names of the applicant’s associates and affiliates. (3) An applicant may withdraw an application for a licence, by notice in writing to the Bank, in the prescribed manner and form, at any time before the licence is granted or the application is rejected. (4) The Bank shall, in considering an application for a licence, made in accordance with subsection (1), have regard to the (a) capital adequacy of the applicant; (b) financial condition, resources and history of the applicant; (c) applicant’s associates and affiliates; (d) transparency of the legal, operational, managerial, governance and ownership structures; (e) character and experience of the directors, significant shareholders, beneficial owners, founders or persons proposing to be concerned in the management of the banking business, financial business or financial service; (f) convenience and needs of the community intended to be served by the banking or financial business or provision of a financial service; and (g) prospects for the profitable operation of the banking or financial service business. Banking and Financial Services [No. 7 of 2017 201 - 8 Verify source ↗
Grant of licence
The Bank must grant a licence within 120 days if the applicant meets the Act’s requirements and applies under section 7. It may grant certain licences for subsidiaries of foreign companies if the stated conditions are met, and licences may include terms, fees, and access requirements. A financial service provider must not operate in breach of licence terms.
8. (1) Where an applicant meets the requirements of this Act, the Bank shall, within one hundred and twenty days of receipt of an application for a licence made in accordance with section 7, grant a licence. Grant of licence (2) A banking licence, financial business licence or financial institution licence for a subsidiary of a foreign company may be granted if— (a) the foreign company is a financial service provider and is authorised to engage in banking business in the country where its principal place of business is located; and (b) the Bank determines that the foreign financial service provider is adequately supervised by competent authorities in the country of incorporation. (3) A licence granted in accordance with subsection (1) or (2), may— (a) contain terms and conditions that the Bank may deter- mine in relation to the business as specified in this Act; (b) provide for the payment of annual or other periodic fees that may be prescribed; and (c) require the financial service provider to allow the Bank access to the offices, records, documents and information of the financial service provider whether inside or outside Zambia. (4) A financial service provider shall not provide or offer to provide banking or financial services in breach of the terms and conditions of the licence. - 9 Verify source ↗
Display of licence
A financial service provider must display its licence prominently at its business premises.
9. A financial service provider shall display the licence issued to the financial service provider in a prominent place at its business premises. Display of licence Rejection of application for licence - 10 Verify source ↗
Rejection of application for licence
The Bank must reject a licence application if any listed ground applies, and if it rejects the application it must notify the applicant in writing within seven days and give reasons.
10. where— (1) The Bank shall reject an application for a licence (a) an applicant does not meet the requirements of this Act; (b) a licence previously held by an applicant has been cancelled by the Bank; (c) an applicant submits false information in relation to the application; or (d) the name that a financial service provider is proposing to be registered is— (i) identical with that of another financial service provider; or (ii) resembles the name of another financial service provider and is likely to deceive the public. 202 No. 7 of 2017] Banking and Financial Services (2) Where the Bank rejects an application for a licence, the Bank shall inform the applicant of its decision, in writing, within seven days of making the decision and shall give reasons for the rejection. - 11 Verify source ↗
Validity of licence
A licence stays valid unless the financial service provider surrenders it or the Bank cancels it.
11. A licence shall remain valid unless surrendered by the financial service provider or cancelled by the Bank. - 12 Verify source ↗
Authorised activities of banks
A banking licence may authorise a bank to carry out specified activities beyond ordinary banking, if the licence conditions and any relevant rules are met.
12. (1) A banking licence may, subject to the conditions of the licence, authorise a bank to engage in the following activities in addition to banking business: (a) grant loans and extend credit, whether unsecured or on the security of property of any kind; Validity of licence Authorised activities of banks (b) deal as a principal or an agent in the currency of Zambia and, subject to the rules and regulatory statements, made in accordance with this Act, in the currency of any other country, foreign exchange transactions, gold, silver, platinum, bullion or coins; (c) provide money transfer or transmission services from a customer’s account; (d) issue and administer payment, credit or debit cards and, in cooperation with other prescribed service providers, the operation of payment, credit card and debit card systems; (e) act as a trustee, executor or administrator of an estate or in any fiduciary capacity for any person; (f) act as a financial agent for any person; (g) provide safekeeping and custodial services for financial assets and securities; (h) provide merchant banking services, including the arrangement and underwriting of shares, trade financing, corporate financing and provision of financial advice; (i) deal as a principal or agent for its customers in financial derivatives; and (j) provide branchless banking services. (2) The Bank may prescribe other authorised activities that may be undertaken by financial service providers which are not inconsistent with this Act. - 13 Verify source ↗
Transfer, pledge, assignment, encumbrance of licence
A licence may be transferred, pledged, assigned or encumbered for a corporate restructuring transaction only with the Bank’s prior written approval, and an application must be filed with the Bank in the prescribed form.
13. (1) Subject to subsection (2), a licence may, with the prior written approval of the Bank, be transferred, pledged, assigned or encumbered in the event of a corporate restructuring transaction. Transfer, pledge, assignment, encumberance of licence Banking and Financial Services [No. 7 of 2017 203 (2) An application for a transfer, pledge, assignment or encumberance of a licence, as specified in subsection (1), shall be made to the Bank in the prescribed manner and form. (3) The Bank may, within thirty days of receipt of an application made in accordance with subsection (2)— (a) approve the application on such terms and conditions as the Bank may determine; or (b) reject the application and give reasons for the rejection. - 14 Verify source ↗
Variation of licence
The Bank may vary a licence, but it must give the licensee written notice first and later notify the licensee of the variation and its effective date.
14. (1) Subject to subsection (2), the Bank may, on the application of a licensee or by its own motion, vary the terms and conditions of a licence. Variation of licence (2) The Bank shall, before varying the terms and conditions of a licence, in accordance with subsection (1), give notice, in writing, to the licensee of the Bank’s intention to make variations in the manner specified in the notice. (3) The licensee may, within thirty days of receipt of the written notice, specified in subsection (2), make written representation to the Bank on the proposed variation. (4) The Bank shall, in deciding whether to vary a licence, have regard to section 7. (5) The Bank shall, on varying a licence in accordance with this section, notify the licensee of the variation, in writing, and the notice shall state the effective date of the variation. (6) Compensation shall not be payable by the Bank to a financial service provider for a variation to a licence made in accordance with this section. - 15 Verify source ↗
Amendment of licence
The Bank may amend a licence on a licensee’s application and payment of a prescribed fee, and must give public notice before doing so.
15. (1) The Bank may, on application by a licensee, and on payment of a prescribed fee, amend a licence where— Amendment of licence (a) a person has succeeded title to the interest in the licence, by substituting the name of the successor in title; or (b) the name of a financial service provider has changed, by substituting the name so changed. (2) The Bank shall, before amending a licence as specified in subsection (1), notify the public by publishing a notice in the Gazette and in a daily newspaper of general circulation or other media in Zambia. - 16 Verify source ↗
Surrender of licence
A licensee that wants to surrender a licence must notify the Bank in writing, and must agree terms with the Bank. The Bank must cancel the licence if the surrender conditions are met.
16. (1) A licensee that intends to surrender a licence shall notify the Bank, in writing, in the prescribed manner and form of its intention to do so. Surrender of licence 204 No. 7 of 2017] Banking and Financial Services (2) A licensee shall agree with the Bank on the terms and conditions with respect to a surrender of a licence, with particular reference to any benefit obtained or liability incurred due to the licence or the requirements of any other relevant law. (3) Where a licence is surrendered, in accordance with subsection (1), and the Bank is satisfied that all liabilities are or will be satisfied and the requirements of the Companies Act, 2017, or the Corporate Insolvency Act, 2017, where applicable, have or shall be complied with, the Bank shall cancel the licence. (4) Where the Bank cancels a license surrendered in accordance with this section, section 17 (7), (8) and (9), shall apply, with the necessary modifications. Act No. of 2017 Act No. of 2017 Suspension or cancellation of licence - 17 Verify source ↗
Suspension or cancellation of licence
The Bank may suspend or cancel a financial service provider’s licence on listed grounds, but must first give written notice and a chance to show cause.
17. (1) Subject to this Act, the Bank may suspend or cancel a licence if the financial service provider— (a) obtained the licence by fraud or submitted false information or statements; (b) contravenes this Act or any other relevant written law; (c) breaches any term or condition of the licence; (d) effects a corporate restructuring transaction without the prior written approval of the Bank; (e) fails to comply with a decision, rule or regulatory statement made by the Bank in accordance with this Act; (f) fails to commence the business to which the licence relates within a period of twelve months from the date of grant of the licence; (g) enters into receivership or liquidation or takes any action for voluntary winding- up or dissolution; (h) enters into any scheme or arrangement, other than a corporate restructuring transaction; (i) ceases to conduct the business authorised by the licence; (j) is the subject of an order made by the Court or tribunal for its compulsory winding-up or dissolution; (k) ceases to fulfil the requirements specified in or by this Act; or (l) engages in unsafe and unsound practices. (2) The Bank shall, before suspending or cancelling a licence, in accordance with subsection (1), give written notice, in the prescribed manner and form, to the financial service provider, of its intention to suspend or cancel the licence and shall— Banking and Financial Services [No. 7 of 2017 205 (a) give reasons for the intended suspension or cancellation; and (b) require the licensee to show cause, within a period of thirty days, why the licence should not be suspended or cancelled. (3) Where a financial service provider takes remedial measures to the satisfaction of the Bank, within the period referred to in subsection (2), the Bank shall not suspend or cancel the licence. (4) The Bank shall, in making its final determination on the suspension or cancellation of a licence, consider the submissions made by the financial service provider, in accordance with subsection (2), and shall consider any remedial measures taken in accordance with subsection (3). (5) The Bank may suspend or cancel a licence if the financial service provider, after being notified in accordance with subsection (2), fails to show cause why the licence should not be suspended or cancelled or does not take any remedial measures to the satisfaction of the Bank within the specified period. (6) Where a licence has been suspended, in accordance with this section, a financial service provider shall, for the period of the suspension of the licence, cease to be entitled to the rights and benefits conferred in accordance with the licence and this Act. (7) Where a licence is cancelled, a financial service provider shall— (a) cease to be entitled to the rights and benefits, conferred in accordance with the licence and this Act, with effect from the date of the cancellation; (b) surrender to the Bank, each copy of the licence in the possession of the financial service provider; and (c) take down any licence on display in every place of business of the financial service provider. (8) The Bank shall, where it suspends or cancels a licence, in accordance with this section— (a) publish a notice of the suspension or cancellation, in the prescribed manner and form, in the Gazette and in a daily newspaper or other media of general circulation in Zambia; and (b) take any additional steps necessary to inform the public of the suspension or cancellation of the licence. 206 No. 7 of 2017] Banking and Financial Services Loss or damage of licence Opening branches, subsidiaries and other establishments (9) A financial service provider whose licence is cancelled shall not, from the date it receives a notice of the cancellation from the Bank— (a) enter into a new contract relating to the banking business, financial business or provision of financial services; or (b) renew or vary a contract relating to thebanking business, financial business or provision of financial services. (1) A financial service provider that has lost a licence shall inform the Bank, within seven days of the loss, and apply to the Bank for a duplicate licence, in the prescribed manner and form, and pay the prescribed fee. - 18 Verify source ↗
Loss or damage of licence
If a financial service provider’s licence is defaced or damaged, it must apply to the Bank for a duplicate licence and pay the prescribed fee.
18. (2) A financial service provider whose licence is defaced or damaged shall apply to the Bank for a duplicate licence, in the prescribed manner and form, and pay the prescribed fee. (3) The Bank shall, where an application made in accordance with subsection (1) or (2) meets the requirements of this Act, issue a duplicate licence on payment by the applicant of the prescribed fee. - 19 Verify source ↗
Opening branches, subsidiaries and other establishments
Financial service providers need the Bank’s prior written approval before opening a branch, subsidiary, or other establishment, and certain firms must notify the Bank before closing a branch.
19. (1) A financial service provider shall not open a branch, subsidiary or other establishment without the prior written approval of the Bank. (2) A financial service provider that intends to open a branch, subsidiary or other establishment shall apply to the Bank for approval in the prescribed manner and form and pay the prescribed fee. (3) A bank or financial institution shall notify the Bank of its intention to close a branch, within sixty days before the closure. (4) A financial business shall notify the Bank of its intention to close a branch, within thirty days before the closure. Representative office Register of financial service providers - 20 Verify source ↗
Representative office
The Bank may prescribe the licensing and regulatory requirements for a representative office.
20. The Bank shall prescribe the licensing and regulatory requirements for a representative office. - 21 Verify source ↗
Register of financial service providers
The Bank must keep a Register of financial service providers and make it open for public inspection during prescribed banking hours.
21. (1) The Bank shall establish and maintain a Register of financial service providers in which shall be entered the— (a) names, addresses and other particulars of the licensees; and (b) names and particulars of persons whose licences are rejected or cancelled. (2) The Register shall be open for public inspection at normal banking hours as prescribed. Banking and Financial Services [No. 7 of 2017 207 - 22 Verify source ↗
Publication of financial service providers
The Registrar must publish specified financial service provider information in the Gazette every year.
22. The Registrar shall publish, annually, in the Gazette— (a) the licences issued to, and the names of, the financial service providers; and (b) a list of licences suspended or cancelled in accordance with this Act. Publication of financial service providers - 23 Verify source ↗
Appointment of Registrar and Deputy Registrars
The Bank must appoint a suitably qualified officer as Registrar in writing and may designate officers as Deputy Registrars.
23. (1) The Bank shall, in writing, and subject to such terms and conditions as it may determine, appoint a suitably qualified officer of the Bank as Registrar. Appointment of Registrar and Deputy Registrars (2) The Bank may designate officers of the Bank as Deputy Registrars who shall be subject to the control and direction of the Registrar and shall exercise the powers and perform the functions directed or delegated by the Registrar. (3) The Registrar and Deputy Registrars, specified in subsections (1) and (2), shall each hold office for a period of five years and shall be eligible for reappointment for a further period of five years. - 24 Verify source ↗
Financial inclusion
The Bank may authorise a financial service provider to offer banking and financial services without physical branches.
24. The Bank may authorise a financial service provider to provide banking and financial services without relying on physical branches in order to promote accessibility by unserved areas to banking and financial services. Financial inclusion PART III OWNERSHIP AND CONTROL OF FINANCIAL SERVICE PROVIDERS
Part
PART III
- 25 Verify source ↗
Limit on voting control
A person generally may not acquire more than 25% voting control in a financial service provider without the Bank’s prior written approval.
25. (1) Subject to subsection (2), a person shall not without prior approval of the Bank, in writing— Limit on voting control (a) acquire any beneficial interest in the voting shares of a financial service provider; or (b) enter into any voting arrangement or other agreement that would enable that person or another person to control more than twenty-five percent of the total votes that could be cast at a meeting of the financial service provider. (2) Subject to section 27 (3), where a person intends to— (a) acquire beneficial interest in the voting shares of a financial service provider; or (b) enter into a voting arrangement trust or other agreement; that would enable that person to control more than twenty-five percent of the total votes that may be cast on a resolution at a meeting of the financial service provider, the financial service provider shall obtain the prior written approval of the Bank. 208 No. 7 of 2017] Banking and Financial Services (3) Where a financial service provider referred to in subsection (1) is publicly traded, the financial service provider shall notify the Bank as soon as it becomes aware that a person has become a significant shareholder in the financial service provider. (4) The Bank shall, within sixty days of receipt of a request for approval as specified in subsection (2), grant or reject the request. (5) Where the Bank rejects a request for approval, made in accordance with subsection (2), the Bank shall inform the requester, in writing, of the reasons for the rejection within fourteen days of such rejection. (6) Subsection (1) does not apply to a company which has more than fifty-one percent of its shares publicly traded on a securities exchange, whether within Zambia or outside Zambia, acceptable to the Bank. (7) Despite subsection (1), the Bank may prescribe a different limit of voting control for financial businesses. (8) The Bank may suspend the exercise of voting rights that are in excess of the limit of voting control specified in subsection (1) or prescribed in accordance with subsection (7). (9) A beneficial owner shall, in person or by proxy, exercise only the voting rights on a voting share that is registered, in the name of the beneficial owner, on the share register of a financial service provider. (10) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding four hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both. - 26 Verify source ↗
Divestment of control
If a financial service provider breaches section 25, the Bank must direct it to reduce control, and the provider must comply within 30 days after the direction.
26. (1) Where a financial service provider contravenes section 25, the Bank shall, on receiving notification, from any person, of the contravention, direct the financial service provider, in the prescribed manner and form, to dispose of the beneficial interest in the voting shares or terminate or modify the voting trust or other arrangement to reduce the person’s control to the extent permissible by or in accordance with this Act. (2) A financial service provider directed to dispose of a beneficial interest in voting shares, or terminate or modify the voting trust or other arrangement, shall do so within thirty days of receiving the direction from the Bank. (3) The Bank may, for purposes of ensuring compliance with subsection (1), direct a financial service provider to submit to the Bank a plan of action with regard to the reduction of control and the Bank may give directions, in writing, for the implementation of the plan. Divestment of control Banking and Financial Services [No. 7 of 2017 209 - 27 Verify source ↗
Ownership
Beneficial owners generally cannot own, control, transfer, or encumber shares in more than one financial service provider without the Bank’s prior written approval; certain nominee holdings and restructuring-related share acquisitions are allowed only with stated conditions.
27. (1) A beneficial owner shall not own shares in the capital of, or acquire or maintain control in, more than one financial service provider, without the prior written approval of the Bank. Ownership (2) A nominee may hold shares in a financial service provider only if the beneficial owner is identifiable and complies with this Act. (3) A beneficial owner shall not transfer to another person any shares or other form of ownership in a financial service pro- vider that constitutes a significant shareholding, without the prior written approval of the Bank. (4) This section does not prevent a person from acquiring all the voting shares in the capital of a financial service provider for the purpose of implementing a corporate restructuring transaction in accordance with this Act, except that the person shall comply with section 25 at the completion of the corporate restructuring transaction. (5) A request for the written approval of the Bank, made for purposes of this section, shall be made in the prescribed manner and form. (6) A beneficial owner of the shares of a financial service provider shall not charge, use as collateral or encumber those shares. (7) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding four hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both. - 28 Verify source ↗
Prohibition of ownership of shares by trusts
A trust or similar controller of another person’s property or money must not own shares in a financial service provider unless the beneficial owner and controlling persons are identifiable and comply with the Act and other relevant written law.
28. A trust or person that controls another person’s property or money under an arrangement or agreement, shall not own shares in a financial service provider, unless the beneficial owner and persons that control the trust, arrangement or agreement are identifiable and comply with this Act and any other relevant written law. Prohibition of ownership of shares by trusts - 29 Verify source ↗
Corporate restructuring transactions
A financial service provider may do a corporate restructuring transaction with another company if section 30 is satisfied and the deal supports its business. A bank or financial institution may do so with a financial business if the restructured company will be a bank or financial institution.
29. (1) Subject to section 30, a financial service provider may effect a corporate restructuring transaction with another company, that is not a financial service provider, if the transaction is in furtherance of the business of the financial service provider. Corporate restructuring transactions (2) A bank or financial institution may effect a corporate restructuring transaction with a financial business if the restructured company shall be a bank or financial institution. 210 No. 7 of 2017] Banking and Financial Services Require- ments for corporate restructuring transaction - 30 Verify source ↗
Requirements for corporate restructuring transaction
A financial service provider must get the Bank’s prior written approval before carrying out a corporate restructuring transaction.
30. (1) Despite any other written law, a financial service provider shall not effect a corporate restructuring transaction without the prior written approval of the Bank. (2) A financial service provider shall apply, in the prescribed manner and form, to the Bank for approval to effect a corporate restructuring transaction, in accordance with section 29, specifying— (a) the name of each financial service provider or company involved in the proposed corporate restructuring transaction; (b) a statement of the nature of the transaction proposed to be entered into; (c) the material documents intended to evidence or implement the corporate restructuring transaction; and (d) such other information as the Bank may require. (3) The Bank shall, in considering an application for approval of a corporate restructuring transaction, have regard to the — (a) capital adequacy of each applicant in relation to the transaction; (b) general financial condition, resources and history of each applicant; (c) character and experience of the directors and persons concerned in the management of the company concerned; (d) prospects of profitability of the company’s operation, if the transaction is approved; (e) probable effect of the transaction on competition in the financial sector; (f) requirements of the Competition andConsumer Protection Act, 2010; and (g) transparency of the legal, financial, operational, managerial, governance and ownership structure of the proposed restructured financial service provider. (4) The Bank shall, where it grants approval for a corporate restructuring transaction, specify a date on which the corporate restructuring transaction shall take effect. Banking and Financial Services [No. 7 of 2017 211 (5) The Bank shall, where it rejects an application for approval for a corporate restructuring transaction, inform the applicant within seven days of the decision and give reasons for the rejection. Effect of corporate restructuring transaction - 31 Verify source ↗
Effect of corporate restructuring transaction
When a corporate restructuring transaction takes effect, the new entity receives the old entity’s assets, liabilities, rights, and obligations, and must file a written statement with the Bank.
31. (1) In this section— “ new entity ” means a financial service provider formed by a corporate restructuring transaction; and “ old entity ” means the financial service provider existing prior to the corporate restructuring transaction. (2) Where a corporate restructuring transaction takes effect in accordance with this Act— (a) the assets and liabilities of the old entity or, in the case of a transfer of assets and liabilities, the assets and liabilities agreed to be transferred, shall vest in the new entity; (b) the new entity shall submit a written statement to the Bank, confirming that the assets and liabilities of the old entity have been transferred in accordance with the approved restructuring proposal; (c) the new entity shall have the same rights and be subject to the same obligations as were, immediately before the transaction took effect, binding on the old entity or, in the case of a transfer of assets and liabilities, the same rights and obligations as were applicable to the old entity with respect to the assets and liabilities so transferred; (d) the agreements, appointments, transactions and documents relating to transactions of the old entity, that were valid immediately before the corporate restructuring transaction took effect, shall continue to be valid and shall be deemed to have been entered into with the new entity; and (e) a mortgage, bond, pledge, guarantee or other instrument relating to the corporate restructuring transaction given to secure past, present and future advances, facilities or services by the old entity, shall be deemed to be a mortgage, bond, pledge, guarantee or instrument given to, or in favour of, the new entity. 212 No. 7 of 2017] Banking and Financial Services (3) The Registrar of Companies and a Registrar of Lands and Deeds shall make endorsements and alterations in the respective registers, so as to record the transfer of the property and any rights or liabilities in the property arising from a corporate restructuring transaction where the Registrar of Companies and the Registrar of Lands and Deeds are satisfied that — (a) the Bank has approved the corporate restructuring transaction; and (b) the transaction has been duly effected through a deed, instrument, mortgage or other document. (4) This section does not affect the rights of any creditor, except to the extent specified in this section and the documents relating to the corporate restructuring transaction. PART IV CORPORATE GOVERNANCE Responsibili- ties of Directors Act No. of 2017
Part
PART IV
- 32 Verify source ↗
Responsibilities of Directors
A board must carry out the functions listed here, including governance, policy, operations, compliance, committee setup, and reporting.
32. (1) A board shall be responsible for the duties and functions specified in the Companies Act, 2017, and this Act. (2) A board shall perform the following functions: (a) formulation of policies for the financial service provider; (b) ensuring corporate governance and business performance of the financialservice provider; (c) directing the affairs and business operations of the financial service provider; (d) ensuring that the business of the financial service provider is carried on in compliance with all applicable laws and regulations and is conducive to safe and sound practices; (e) constituting committees of the board as prescribed; (f) reporting to the shareholders, at an annual general meeting, on the internal controls and systems and information management systems of the financial service provider; (g) reporting to the Bank on any material changes in the activities, structure and condition of the financial service provider; and (h) reporting to the Bank on matters that may affect the suitability of shareholders, directors and senior managers. Banking and Financial Services [No. 7 of 2017 213 Board meetings Act No. of 2017 Qualifications of directors, chief executive officers, chief financial officers Act No. of 2017 - 33 Verify source ↗
Board meetings
The Bank may direct a board to meet within three days, ask it to consider specified items, and appoint an observer. If the board does not meet as directed, the Bank must take appropriate action to protect the financial system, the provider, and customers.
33. (1) Despite the provisions of this Act, the Companies Act, 2017, or the articles of association, the Bank may— (a) direct a board to meet within three days at such place in Zambia as the directive shall specify; (b) request a board to consider and decide on such items relating to the financial service provider as the Bank may direct; and (c) appoint an observer to a meeting of a board concerned in accordance with this section. (2) Where a meeting is convened, in accordance with subsec- tion (1) (a)— (a) the quorum for the meeting shall be three directors or one third of the total number of directors, whichever is the greater; (b) decisions shall be taken by a simple majority of the directors present; and (c) any decision taken in accordance with paragraph (b) shall be binding on the financial service provider. (3) The Bank shall, where a board fails to convene a meeting as directed by the Bank in accordance with subsection (1), take appropriate action to safeguard the integrity of the financial system, the interests of the financial service provider and its customers. - 34 Verify source ↗
Qualifications of directors, chief executive officers, chief
People need the Bank’s prior written approval before taking certain leadership roles in a financial service provider, and some people are disqualified from those roles.
34. (1) A person shall not be elected or appointed as a director, chief executive officer or chief financial officer of a financial service provider without the prior written approval of the Bank. (2) Despite anything to the contrary in the Companies Act, 2017, or any other written law, a person is not qualified for election or appointment as a director or senior officer if that person— (a) is not a fit and proper person to hold the relevant office in accordance with this Act; (b) is below the age of twentyone years; (c) has been adjudged bankrupt by a competent court or has made an arrangement or composition with that person’s creditors, in Zambia or elsewhere; (d) has been convicted of an offence involving fraud or dishonesty; (e) has a mental disability that makes the person incapable of performing the functions of the office; 214 No. 7 of 2017] Banking and Financial Services (f) has been suspended or removed from office in accordance with this Act; (g) has been a director, member, chief executive officer, chief financial officer, manager or senior officer of a company that has— (i) been adjudged insolvent; (ii) entered into a composition with creditors; or (iii) gone into liquidation or has entered into any other arrangement with creditors in Zambia or elsewhere; (h) has been removed by a competent court, in Zambia or elsewhere, from an office of trust on account of misconduct or breach of that trust; or (i) is an expatriate who does not meet such additional requirements as the Bank may prescribe by rules issued in accordance with this Act. (3) A person shall not be a director of more than one financial service provider without the prior written approval of the Bank. (4) A person who is a director or senior officer in a financial service provider, whose licence is cancelled in accordance with this Act, shall not, without the prior written approval of the Bank, be elected or appointed as a director or senior officer of another financial service provider. (5) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding four hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both. - 35 Verify source ↗
Non-executive directors to be in majority
A bank or financial institution board may include executive and non-executive directors, but non-executive directors must be the majority.
35. (1) A board of a bank or financial institution may be constituted of executive and non-executive directors, except that the non-executive directors shall be in the majority. (2) The Minister may, on the recommendation of the Bank, by statutory instrument, provide for the application of subsection (1) to a financial business. Non- executive directors to be in majority Reporting obligations of Board and directors - 36 Verify source ↗
Reporting obligations of Board and directors
The Board and each director must immediately report in writing to the Bank if they believe the financial service provider may be failing as a going concern, may not meet obligations when due, or may not meet capital requirements.
36. (1) The Board and each director individually shall immediately report in writing to the Bank if they have reason to believe that the financial service provider— (a) may not be able to conduct its business as a going concern; (b) appears to be or is likely in the near future to be unable to meet all or any of its obligations as they fall due; and (c) does not or may not be able to meet its capital requirements as prescribed in this Act. Banking and Financial Services [No. 7 of 2017 215 (2) Where the Board or a director fails, omits or neglects to report to the Bank any matter required to be reported under subsection (1), the Bank may suspend or remove the Board or director. (3) Subject to section 165, a person who contravenes subsection (1) commits an offence and is liable upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both. - 37 Verify source ↗
Conduct of directors, chief executive officers, chief financial
Certain directors and managers of a financial service provider must ensure compliance with the Act, regulations, and the Bank’s regulatory statements.
37. (1) A director, chief executive officer, chief financial officer or manager concerned in the management of a financial service provider, in exercising the powers and discharging the duties of office, shall ensure compliance with this Act, regulations and regulatory statements of the Bank. (2) A person who contravenes subsection (1) commits an offence and is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both. Conduct of directors, chief executive officers, chief financial officers and managers - 38 Verify source ↗
Disclosure of interest
Directors and senior officers must disclose conflicts of interest in writing and follow board-meeting restrictions.
38. (1) A director shall declare, annually, in writing, to the board the names and addresses of the director’s associates and the material interests of the director. Disclosure of interest (2) A director or senior officer who— (a) is a party to, or has a direct or indirect interest in, a contract or proposed contract with the financial service provider or in the granting of an advance by the financial service provider; or (b) has a material relationship with a party or prospective party to a contract or a proposed contract with the financial service provider; shall disclose, in writing, to the financial service provider, the nature and extent of the relationship. (3) A disclosure of interest, to be made in accordance with this section, shall be made at a meeting of the board at which the question of entering into the contract or granting the advance is first considered, or if the director or senior officer is not, at the date of that meeting, interested in the proposed contract or advance, at a board meeting held immediately after the director or senior officer becomes interested. 216 No. 7 of 2017] Banking and Financial Services (4) A director or senior officer with an interest or material relationship with a party to a contract, shall not participate in a meeting of the board at which the contract concerned is discussed and the director shall refrain from voting on any matter related to the contract, except that a departure of a director from the meeting, shall not disqualify the director for purposes of constituting a quorum. (5) A director or senior officer shall not be required to make a declaration or give a notice in person, at a meeting of the board, if the director or senior officer delivers the notice and disclosure of interest to each director, at least seven days before the meeting. (6) A director or senior officer who fails to comply with this section commits an offence and is liable, upon conviction, to a fine not exceeding seven thousand penalty units for each day that the offence continues. (7) Where a director or senior officer fails to disclose an interest or material relationship as specified in this section, the Court may, on the application of a financial service provider, shareholder or the Bank— (a) set aside the contract on such terms as it may determine; and (b) suspend the director or senior officer from office. (8) For purposes of this section— (a) persons have a material relationship if they are associated persons or a transaction relates to or is connected with the wealth, business or family interests of the person; or (b) a person has a material interest in an entity where the person owns, directly or indirectly, more than ten percent of any class of voting shares or is a director, proprietor or partner in the entity. - 39 Verify source ↗
False statement and obstruction of examinations
Certain financial service provider personnel must not make false or misleading statements or entries, omit required entries, or obstruct audits or lawful inspections.
39. (1) A director, senior officer, or other employee, agent, accountant or adviser of a financial service provider shall not— (a) negligently or with intent to deceive, make a false or misleading statement or entry or omit to make a statement or entry in any book, account, report or statement of the financial service provider; or (b) obstruct or attempt to obstruct— (i) the proper performance by an auditor of the auditor’s duties in accordance with this Act, the Companies Act, 2017, or any other relevant law; or (ii) a lawful inspection of the financial service pro- vider by a duly authorised inspector appointed by the Bank. False statement and obstruction of examina- tions Act No. of 2017 Banking and Financial Services [No. 7 of 2017 217 (2) A person who contravenes subsection (1) commits an offence and is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding one year, or to both. - 40 Verify source ↗
Suspension or dismissal of directors and senior officers by
The Bank may suspend a director or senior officer for up to six months, ask the Court to extend suspension or dismiss them, and must act to dispose of shareholding interests when a significant shareholder ceases to qualify.
40. (1) The Bank may, by order in writing, suspend from office for a period not exceeding six months, a director or senior officer who fails to take reasonable steps to secure compliance by the financial service provider with the requirements of the Act, regulations, rules or regulatory statements made in accordance with this Act or any other relevant written law. Suspension or dismissal of directors and senior officers by Bank and removal of shareholders (2) The Bank may, at any time before the expiry of the period referred to in subsection (1), apply to the Court for an order extending the suspension on good cause shown or an order dismissing a director or senior officer and the Court may, by order— (a) suspend from office the director or senior officer concerned for such period as it considers appropriate in the circumstances; or (b) dismiss the director or senior officer from office. (3) A director or senior officer who performs the functions of office during the period of suspension, or after being dismissed from office, commits an offence and is liable, upon conviction, to a fine not exceeding three hundred thousand penalty units or imprisonment for a term not exceeding three years, or to both. (4) A significant shareholder shall cease to be a shareholder in a financial service provider if the Bank determines, on evidential grounds, that the significant shareholder is not a fit and proper person to continue holding shares in financial service provider. (5) The Bank shall, upon application to the Court, dispose of any shareholding interest, of any person that ceases to be a shareholder in accordance with subsection (4), in a manner and to persons ordered by the Court, subject to the payment of compen- sation, where applicable. - 41 Verify source ↗
Fit and proper requirements
The Bank may set fit and proper requirements for shareholders, directors, or senior officers, and may remove them from office if it finds those requirements were breached on evidential grounds.
41. (1) The Bank may prescribe fit and proper requirements for a shareholder, director or senior officer, which may include criteria relating to— Fit and proper requirements (a) probity, personal integrity and reputation; (b) competency and capability; and (c) financial integrity. 218 No. 7 of 2017] Banking and Financial Services (2) The Bank may remove a shareholder, director or senior officer from office, if it considers that the person, on evidential grounds, has breached the requirements prescribed in subsection (1). Corporate governance - 42 Verify source ↗
Corporate governance
The Bank must issue rules on corporate governance charters and related board governance requirements; boards must develop their own charter from those prescribed contents.
42. (1) The Bank shall, by rules issued in accordance with this Act, prescribe the contents of a corporate governance charter to be adopted by a financial service provider. (2) A board shall develop its own corporate governance char- ter based on the contents prescribed in accordance with subsec- tion (1). (3) The Bank shall, by rules issued in accordance with this Act, prescribe— (a) the number of directors to be appointed for a board of a bank or financial institution; (b) the number and type of committees of a board to be constituted and their functions; (c) mandatory conditions under which a senior officer or other employee concerned with the management or financial affairs of a financial service provider shall be removed from office by a board; and (d) the reporting requirements relating to compliance of this Act, the Companies Act, 2017, and rules and regula- tions issued in accordance with this Act. PART V BUSINESS OPERATIONS Act No. of 2017 Principal administra- tive office
Part
PART V
- 43 Verify source ↗
Principal administrative office
A financial service provider must keep a principal administrative office in Zambia, tell the Bank where it is, and get prior written approval before changing its location.
43. (1) A financial service provider shall establish and maintain a principal administrative office in Zambia and shall inform the Bank, in the prescribed manner and form, of the location of the principal administrative office. (2) A financial service provider shall not change the location of its principal administrative office without the prior written approval of the Bank. (3) A financial service provider that intends to change the location of its principal administrative office shall, in the prescribed manner and form, and at least sixty days before the proposed change, apply to the Bank for the approval of the proposed change. (4) The Bank shall, when considering an application made in accordance with subsection (3), take into consideration the suitability of the proposed location. Banking and Financial Services [No. 7 of 2017 219 (5) Where the Bank rejects an application made in accordance with subsection (3), the Bank shall inform the financial service provider, in writing, within seven days of making the decision and give reasons for the rejection. - 44 Verify source ↗
Use and alteration of name
A financial service provider must use its name on specified documents and communications, and cannot change or use another name without the Bank’s prior written approval.
44. (1) A financial service provider shall use its name— (a) on letterheads, correspondence, official documents, advertisements or other communication published or issued by the financial service provider; and (b) in written contracts to which a financial service provider Use and alteration of name is a party. (2) A financial service provider shall not, without the prior written approval of the Bank, alter its name or use or refer to itself for any business purpose by any other name or an abbreviation of the name. (3) A financial service provider may, with the written approval of the Bank, use its name with the name of a business or undertaking with which it has had a corporate restructuring transaction or, in the case of a change of name, by the subsequent name registered. - 45 Verify source ↗
Business hours
A financial service provider must stay open to the public during business hours set by the Bank, unless the Bank authorises different hours or closure.
45. (1) A financial service provider shall remain open for business with the public during the hours prescribed by the Bank or such other hours as the Bank may authorise. Business hours (2) The Bank may, on application by a financial service provider, authorise the financial service provider to be closed on any business day subject to such terms and conditions as the Bank may determine. - 46 Verify source ↗
Bank holiday
The Minister may prescribe a bank holiday on the Bank’s recommendation, and bank or financial institution obligations due on a bank holiday move to the next business day.
46. (1) The Minister may, on the recommendation of the Bank, by statutory instrument, prescribe a bank holiday. Bank holiday (2) Where an obligation to be discharged by a bank or financial institution falls on a bank holiday, it shall be discharged on the next business day following the bank holiday. (3) In this section, “bank holiday” means a day on which a bank or financial institution, except a bank’s or financial institution’s branch at an airport or border post, is not open for business with the public, whether or not that day is a public holiday. - 47 Verify source ↗
Records to be registered and maintained
A financial service provider must prepare and maintain specified records, keep some of them at its principal administrative office, and make the records available for inspection by certain people at reasonable times.
47. (1) A financial service provider shall prepare and maintain records which shall contain— (a) the articles of association and amendments to the articles Records to be registered and maintained of association; (b) a register of shareholders and the number of shares registered in the name of each shareholder; 220 No. 7 of 2017] Banking and Financial Services (c) the minutes of meetings and resolutions of the board; (d) the minutes of meetings and resolutions of the shareholders; (e) the business correspondence, with supporting accounting records, showing the state of its business affairs and transactions and the financial position of the financial service provider; (f) for each customer of the financial service provider, records showing, particulars of transactions with, or for the account of, the customer and the balance owing to or by the customer on a daily basis; and (g) such other records required to be prepared and maintained in accordance with this Act or as may be prescribed by the Bank. (2) The records, referred to in subsection (1) a), (b), (c), (d) and (e) shall be kept and maintained at the principal administrative office of the financial service provider. (3) The records, referred to in subsection (1), shall be open for inspection at reasonable times by— (a) the directors; and (b) except for records specified in subsection (1) (c) and (f), the shareholders and creditors, or their personal representatives, as provided in this Act and any other relevant law. - 48 Verify source ↗
Credit documentation
A financial service provider must keep credit documentation and related business information at its principal administrative office, in the form the Bank determines.
48. (1) A financial service provider shall cause to be established and maintained, at the principal administrative office, credit documentation and other information relating to the business of the financial service provider with customers and other persons, as the Bank may determine. (2) In this section, “credit documentation” means the following documents attaching or relating to a contract entered into by a financial service provider with any other person for the provision of a banking or financial service or in respect of a banking or financial service performed or to be performed by the financial service provider: (a) the current financial statements showing indebtedness of a borrower tothe financial service provider and where the debt is guaranteed, the details of the guarantor; (b) a description of the collateral over which the financial service provider has a mortgage or charge as security for the settlement of a credit facility; Credit documentation Banking and Financial Services [No. 7 of 2017 221 (c) a statement of the terms of the credit, including the principal amount, rate of interest, schedule of repayments and the borrower’s objective or purpose for borrowing; and (d) documents evidencing the assessment and approval of the credit facility by the financial service provider. - 49 Verify source ↗
Manner of keeping records
A financial service provider must keep its register or record in one of the permitted forms and ensure it can be reproduced in intelligible written form within a reasonable time.
49. A register or record that a financial service provider is required to establish and maintain in accordance with this Act shall be— Manner of keeping records (a) bound in looseleaf or photographic film form; (b) entered or recorded by any system of mechanical or electronic data processing or any other device or process capable of reproducing the information in intelligible written form within a reasonable time; and (c) if kept in any one form, be capable of conversion to any other form. - 50 Verify source ↗
Retention of records
A financial service provider must keep a register or record for ten years, and the Bank can require retention for a longer period.
50. (1) A financial service provider shall retain a register or record for a period of ten years. Retention of records (2) The Bank may require a financial service provider to retain records for a longer period than specified in subsection (1). - 51 Verify source ↗
Maintenance of records
Financial service providers must protect registers and records from loss, destruction, falsification, and unauthorised access; they may destroy a converted record. Other persons must not tamper with specified books, documents, securities, or accounts, and breaches are offences.
51. (1) A financial service provider shall, with respect to a register or record— Maintenance of records (a) prevent loss or unauthorised destruction; (b) prevent falsification of entries; (c) facilitate the detection and correction of inaccuracies; and (d) prevent the use or access of information by an unauthorised person. (2) A financial service provider may destroy a register or record, kept in accordance with this Act, at any time after the register or record has been converted to another form. (3) A person shall not— (a) destroy, alter, mutilate or falsify any book, document, valu- able security or account, which belongs to a financial service provider or customer, or any entry in such a book, document, or account, or be privy to any such act; (b) make or be privy to the making of a false entry in a book, document or account; or 222 No. 7 of 2017] Banking and Financial Services (c) omit or be privy to an omission of a material particular from a book, document or account. (4) A person who contravenes subsection (3) commits an offence and is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both. PART VI PRUDENTIAL REGULATION AND SUPERVISION Minimum capital requirements
Part
PART VI
- 52 Verify source ↗
Minimum capital requirements
The Bank sets minimum capital requirements for financial service providers, and those providers must calculate and maintain capital as prescribed. They also cannot issue shares or other securities except limited prescribed types unless full face value is paid in Zambian Kwacha.
52. (1) The Bank shall prescribe the minimum paidup capital, minimum common equity tier one, minimum primary capital and minimum regulatory capital requirements for financial service providers. (2) A financial service provider shall compute its regulatory capital in the manner prescribed by the Bank. (3) A financial service provider shall commence operations with the minimum paidup capital prescribed by the Bank. (4) A financial service provider shall maintain the minimum common equity tier one, primary capital and regulatory capital ratios prescribed by the Bank. (5) Despite subsection (4), the Bank may require a bank or financial institution to maintain common equity tier one and primary and regulatory capital ratios, in excess of the prescribed amounts, where a bank or financial institution— (a) has been operating for less than three years; (b) has been or is expected to have losses resulting in capital deficiencies; (c) has significant exposure to risk, whether credit, concentration of credit, interest risk, liquidity, operational or any other serious weaknesses in the quality of its assets or earnings; (d) has a high or severe volume of poor quality assets; (e) is growing rapidly, internally or through acquisitions; (f) may be adversely affected by the activities or conditions of its holding company, subsidiary or associates; (g) has deficiencies in its ownership or management, shareholding structure, composition, qualifications of its directors or senior officers or risk management policies and procedures; or Banking and Financial Services [No. 7 of 2017 223 (h) may be adversely exposed in any other circumstance determined or prescribed by the Bank. (6) A financial service provider shall not issue any share in its capital or other security other than a bonus share or a share in lieu of dividend or other prescribed security unless it receives the fullface value thereof in Zambian Kwacha. - 53 Verify source ↗
Capital conservation buffer
Financial service providers must build a capital conservation buffer, and they must not pay dividends or similar discretionary amounts if that would reduce the buffer below the required level.
53. (1) A financial service provider shall build up a capital conservation buffer. (2) The capital conservation buffer shall be in the form of common equity tier one as prescribed by the Bank. (3) The Bank may prescribe different buffer requirements for different categories of financial service providers. (4) A financial service provider shall not declare, credit or pay any dividends, or make other discretionary payments or make any transfer from retained earnings, if doing so would result in failure to provide for, or maintain, the required capital conservation buffer. Capital conservation buffer - 54 Verify source ↗
Countercyclical capital buffer
The Bank may require banks and financial institutions to hold a counter-cyclical capital buffer, and it must give 30 days’ advance notice when changing that decision, except for decreases, which take effect immediately.
54. (1) Subject to subsection (3), the Bank may require banks and financial institutions to maintain a counter-cyclical capital buffer in their riskweighted assets and forms of common equity capital tier one. Counter- cyclical capital buffer (2) Where the Bank adjusts the counter-cyclical capital buffer, the Bank shall announce the decision at least thirty days in advance of the effective date, except that a decision to decrease the level of the countercyclical capital buffer shall take effect immediately. (3) A counter-cyclical capital buffer shall not be required where the Bank determines that the capital released shall help to absorb losses in a bank or financial institution that pose a risk to financial stability. - 55 Verify source ↗
Restriction on payment of dividends
A bank or financial institution must apply to the Bank for approval before declaring a dividend.
55. (1) A bank or financial institution that intends to declare a dividend shall apply to the Bank, for approval of the amount proposed to be declared. Restriction on payment of dividends (2) The Bank may, having regard to the impact on the capital adequacy, capital conservation buffer and the risk profile of the applicant— (a) approve the amount of dividend intended to be declared; (b) approve a reduced amount of dividend; or (c) prohibit the payment of any dividend. 224 No. 7 of 2017] Banking and Financial Services Leverage ratio Mainte- nance of liquidity - 56 Verify source ↗
Leverage ratio
The Bank may require banks and financial institutions to keep common equity tier one at a ratio set by the Bank against total on- and off-balance-sheet assets.
56. The Bank may require banks and financial institutions to maintain common equity tier one, to total on and off balance sheet assets, at a ratio prescribed by the Bank. - 57 Verify source ↗
Maintenance of liquidity
Banks and financial institutions must keep adequate liquidity, avoid falling below the Bank’s prescribed liquidity level, and answer Bank requests for liquidity information within seven days.
57. (1) A bank or financial institution shall maintain adequate and appropriate forms of liquidity as prescribed by the Bank. (2) A bank or financial institution shall not— (a) hold liquid assets, within the bank or financial institution, of less than the percentage level or proportion prescribed by the Bank; or (b) grant or permit, for the period during which liquid assets are less than the percentage level or proportion pre- scribed by the Bank, an increase in its outstanding loans, overdrafts or investments. (3) A bank or financial institution shall, within seven days from the date of a request on the liquidity position of the bank or finan- cial institution by the Bank, provide the information to the Bank. (4) The Bank may impose, on a bank or financial institution that fails to comply with this section, an administrative penalty on the amount of deficiency, at a rate of two or more percentage points above the annual interest rate prevailing in the most recent ninetyone day treasury bill auction. - 58 Verify source ↗
Constraints on contracts with associated person
A financial service provider may contract with an associated person only if the stated conditions are met, including advance board approval, favourable terms, exemption by the Bank for the class/type, or conformity with the Act.
58. (1) A financial service provider may enter into a contract with an associated person if the— (a) board approves the contract in advance, and the contract is on terms that are not less favourable to the financial service provider than the terms of similar contracts en- tered into by the financial service provider with persons who are not associated; (b) contract is for a nominal sum or of a class or type ex- empted by the Bank from the operation of this section; or (c) terms of the contract are in conformity with this Act. Constraints on contracts with associated person Examination of financial service providers - 59 Verify source ↗
Examination of financial service provider
The Bank may examine a financial service provider, require reports and explanations, order remedial action, and unauthorized disclosure of the report is prohibited.
59. (1) The Bank may cause an examination to be made of a financial service provider in order to determine whether the financial service provider is— (a) in a sound financial condition; and (b) complying with this Act, and any other relevant written law. Banking and Financial Services [No. 7 of 2017 225 (2) Despite any other written law, the Bank may access the business of a financial service provider and examine— (a) oral and documented information including information in computers, books, minutes, accounts and vouchers; (b) cash and securities; and (c) any other thing in the possession, custody or under the control of a financial service provider or its affiliate. (3) The Bank shall, after the completion of an examination undertaken in accordance with this section, submit a report on the examination to the chairperson of the board concerned and shall require the— (a) chairperson of the board to submit the report to a meeting of the board; and (b) financial service provider to provide satisfactory expla- nations, in writing, on actions to be taken on the issues raised in the report. (4) A report submitted by the Bank, in accordance with sub- section (3), shall be confidential and a director, senior officer or other employee of a financial service provider and any person who, by reason of the person’s capacity or office, has access to the report shall not, without the prior written approval of the Bank, while holding that office, or after the termination of employment, communicate the report or any part of the report to any person other than a director, a senior officer or other employee of that financial service provider. (5) The Bank may, where it determines that an examination undertaken in accordance with this section shows that the busi- ness of a financial service provider is conducted in a manner detri- mental to the interests of the financial service provider or its share- holders— (a) require the financial service provider to take such remedial measures as the Bank may direct; or (b) appoint a person who is competent to advise the financial service provider on the necessary remedial measures to be taken in accordance with paragraph (a). (6) A person who, in good faith, provides information or facilitates an examination of a financial service provider, in compliance with this section, shall be indemnified against any claim or sanction as a consequence of such action. 226 No. 7 of 2017] Banking and Financial Services (7) A person who contravenes subsection (3), (4) or (5) commits an offence is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units, or to imprisonment for a term not exceeding one year, or to both. Submission of returns - 60 Verify source ↗
Submission of returns
Banks or financial institutions must send the Bank specified financial and operational reports in the form and within the time the Bank prescribes. The Bank may also require periodic reports from a financial business.
60. (1) A bank or financial institution shall deliver to the Bank, in the form and within the period prescribed by the Bank— Consolidated supervision (a) a statement showing assets and liabilities as at the close of the last business day of that month; (b) the amount of its regulatory capital and reserve funds and the ratio that the amount of its liabilities to the public bears to the amount of its regulatory capital and reserve funds; (c) a statement showing the loans that are performing; (d) a statement showing the loans that are non-performing, loans that have been restructured including the terms of restructuring as the case may be; and (e) such other statements, further details or evidence con- cerning its operations, financial condition and resources as may be prescribed by the Bank. (2) The Bank may require a financial business to provide peri- odic reports showing information on its operations, financial condi- tion and resources as the Bank may prescribe. - 61 Verify source ↗
Consolidated supervision
The Bank may require related companies or controllers of a financial service provider to give information or documents in writing, and may appoint a competent person to examine them.
61. (1) The Bank shall, where it considers it necessary for the safety and soundness of the financial service provider, safety of depositors, or to determine whether this Act is being complied with, require, in writing, an affiliate, associate, holding or subsidiary company, or a person that controls the financial service provider, to provide the Bank or its appointed agent such information or documents as may be necessary, including the financial statements and other financial records of that affiliate, associate, holding or subsidiary company or person in control, within the period specified in the notice. (2) The Bank may appoint a competent person to undertake an examination of the operations and affairs of an affiliate, associ- ate, holding or subsidiary company of a financial service provider or any person that controls a financial service provider, in order to determine whether the operations and affairs of the affiliate, asso- ciate, holding or subsidiary company or the person in control are detrimental to the safety and soundness of the financial service provider. Banking and Financial Services [No. 7 of 2017 227 (3) A person who fails, refuses, omits or neglects to provide information requested in subsection (1) or (2) commits an offence is liable, upon conviction, for each day during which the contravention continues, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both. (4) A significant shareholder or director who fails, refuses, omits or neglects to provide information requested for in accordance with subsection (1) or (2) or is a party to the failure, refusal, omission or neglect, ceases to be a fit and proper person and shall not be or remain a significant shareholder or director in the financial service provider. - 62 Verify source ↗
Affiliates and crossborder supervision
The Bank may supervise affiliates of financial service providers and share supervisory information with foreign supervisory authorities when needed for effective consolidated supervision.
62. (1) The Bank may exercise its authority over an affiliate of a financial service provider where the Bank determines that it is necessary to implement supervision on a consolidated basis or to effectively supervise the financial service provider and the risks to which it is subjected. Affiliates and cross- border supervision (2) The Bank may, in order to ensure effective supervision of a financial service provider that operates both within and outside Zambia, enter into arrangements for sharing supervisory information on a reciprocal basis with the competent supervisory authorities outside Zambia. - 63 Verify source ↗
Unsafe and unsound practices
The Bank can define unsafe or unsound practices and take supervisory action against financial service providers engaged in them.
63. (1) The Bank may prescribe conduct or actions which constitute unsafe or unsound practices. Unsafe and unsound practices (2) Where the Bank determines that a financial service provider is committing or pursuing an act or course of conduct that is unsafe or unsound, the Bank may enter into a written agreement, within the time, form and content as directed by the Bank, with the financial service provider or its board to establish a programme of action to counteract the unsafe or unsound practice and to establish or maintain safe and sound practices in the conduct of the business of the financial service provider. (3) Where the Bank is unable to agree with a financial service provider, as provided in subsection (2), or where the Bank considers that the need for prompt action makes the negotiating of an agreement impractical, the Bank may direct the financial service provider, board or chief executive officer to cease or refrain from doing the act, pursuing the course of conduct or performing any act to rectify the situation. 228 No. 7 of 2017] Banking and Financial Services (4) The Bank may, where it determines that a financial service provider is committing or pursuing an act or course of conduct that is unsafe or unsound— (a) direct the financial service provider to refrain from adopting or pursuing a particular course of action or to restrict the scope of its business in a particular way; (b) impose a limitation on the bank’s acceptance of deposits, payment of interest on deposits, granting of credit, making of investments or payment of dividends; (c) prohibit the bank or financial institution from soliciting deposits or paying interest on deposits made by or from specified persons or classes of persons; (d) prohibit the financial service provider from entering into any other transaction or class of transactions or from commencing or continuing an activity that it is permitted in this Act; or (e) require the suspension or removal from office of any director, senior officer or other person. (5) A direction given in accordance with this section shall be given by written notice to the financial service provider or person concerned and may in like manner be varied or revoked. (6) A direction given, in accordance with this section, shall be effective immediately and shall remain in effect in accordance with its terms unless discontinued on appeal. (7) A person acting in contravention of an agreement made, or direction given, in accordance with this section, commits an offence and is liable, upon conviction, to a penalty not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both. (8) A person who carries out any unsafe or unsound practice, contrary to the provisions of this Act or rules issued in accordance with this Act, commits an offence and is liable, upon conviction, to a fine not exceeding three hundred thousand penalty units or to imprisonment for a term not exceeding three years, or to both. Supervisory actions - 64 Verify source ↗
Supervisory actions
The Bank must take supervisory action against a financial service provider when specified compliance, examination, capital, or solvency problems occur.
64. (1) The Bank shall take supervisory action against a financial service provider where — (a) the financial service provider fails to comply with this Act and any rule or regulatory statement issued in accordance with this Act or any other applicable law; Banking and Financial Services [No. 7 of 2017 229 (b) the financial service provider refuses to permit an examination or obstructs an examination from being made as provided in or in accordance with this Act; (c) an examination instituted in accordance with thisAct shows that a financial service provider— (i) conducts business in breach of any relevant written law or engages in conduct that is unsafe or unsound; (ii) is unable, or is likely to become unable, to continue its operations in the ordinary course of its business; (iii) has capital which is less than the prescribed minimum; or (iv) is insolvent. (2) Without prejudice to any other course of action taken by the Bank, the supervisory action that the Bank may take as specified in subsection (1), includes— (a) making directions, in writing, that the financial service provider takes remedial action to comply with any rule or regulatory statement; (b) issuing a regulatory statement or measures to be taken to improve the management, financial soundness or business methods of a financial service provider; (c) requiring the board or senior officers to execute an agreement on implementation of a regulatory statement issued in accordance with paragraphs (a) and (b); (d) performing or appointing an agent to perform a special examination of the financial service provider to determine the financial condition of the financial service provider at the cost of the financial service provider; or (e) taking possession of a financial serviceprovider. (3) Where a financial service provider fails, refuses or neglects to comply with a regulatory statement issued or an agreement made, in accordance with subsection (1), the Bank may do any of the following: (a) issue a cease and desist order, of temporary or indefinite duration, requiring the financial service provider and its board to— 230 No. 7 of 2017] Banking and Financial Services (i) stop the unsafe or unsound practice; (ii) limit its lending or borrowing; (iii) stop any declaration or payment of dividends; or (iv) stop any other activity as may be specified by the Bank; (b) remove or suspend a person from the management of the affairs of the financial service provider; (c) impose penalties on the offending senior officer, which shall be paid by the senior officer; (d) appoint a person who, in the consideration of the Bank, is suitablyqualified and competent to advise and assist the financial service provider, generally or for the purposes of implementing the orders, regulatory statement or agreement made in accordance with paragraph (a), (b) or (c); (e) appoint a person who is suitably qualified and competent to manage the affairs of a financial service provider for such period as shall be necessary to rectify the problem; (f) require the financial service provider to reconstitute its board within such period as shall be specified; (g) withhold approvals on establishment of new branches; (h) restrict or vary the financial service provider’s licence; (i) require the financial service provider to increase its capital to such levels as may be specified; or (j) impose any administrative penalty as the Bank may consider appropriate in the circumstance. Financial service provider suffering large losses - 65 Verify source ↗
Financial service provider suffering large losses
If a financial service provider with the prescribed capital requirements has or is likely to have large losses in a financial year, the Bank must take action against it.
65. The Bank shall, where a financial service provider complying with the prescribed capital requirements incurs or is likely to incur large losses within any financial year, take the following actions against the financial service provider: (a) prohibit the financial service provider from declaring and distributing any dividends that are likely to cause the financial service provider not to comply with the capital requirements prescribed in this Act; (b) undertake more frequent examinations of the financial service provider; or (c) require the board or senior officers to provide a written explanation detailingthe causes of losses and the measuresto be taken by the financial service provider to rectify the position and avert future losses. Banking and Financial Services [No. 7 of 2017 231 Under- capitalised financial service provider - 66 Verify source ↗
Under-capitalised financial service provider
If a financial service provider is under-capitalised, the Bank must take corrective actions including requiring a capital restoration plan, requiring capital to be raised, and restricting bonuses.
66. (1) Where a financial service provider is under-capitalised, the Bank shall, in addition to the actions specified in section 65, take the following actions against the financial service provider: (a) order the financial service provider to submit to the Bank, within thirty days of the order, a capital restoration plan to restore the financial service provider to capital adequacy as prescribed in this Act; (b) require the financial service provider to increase the capital to prescribed levels, within ninety days of submission of the capital restoration plan; and (c) prohibit the financial service provider from awarding any bonuses or increments in the salary, emoluments and other benefits to directors and senior officers. (2) The Bank may, in addition to the actions, specified in subsection (1), appoint a person who is suitably qualified and competent to advise and assist a financial service provider in designing and implementing a capital restoration plan. (3) A person, appointed in accordance with subsection (2), shall report to the Bank the progress being made on the capital restoration plan, during such intervals as the Bank may direct. (4) Where the Bank takes action, in accordance with subsection (1) or (2), and the financial service provider fails, refuses or neglects to comply, the Bank shall— (a) prohibit the financial service provider from opening new branches; (b) impose restrictions on growth of assetsor liabilities of the financial service provider as the Bank shall determine; (c) restrict the rate of interest on savings and time deposits payable by the financial service provider to such rates as the Bank shall specify; (d) require the financial service provider to remove the senior officers responsible for the non-compliance; or (e) order the financial service provider to do any or such other things as the Bank may consider necessary to rectify the capital deficiency of the financial service provider. (5) In this section, a financial service provider shall be considered as under-capitalised if it does not comply fully with any prescribed capital adequacy requirements. 232 No. 7 of 2017] Banking and Financial Services Significantly under- capitalised financial provider Corrective actions against financial businesses Modification, cancellation and upholding of regulatory statement Notice of taking possession - 67 Verify source ↗
Significantly under-capitalised financial service provider
If a financial service provider is significantly undercapitalised, the Bank must take supervisory action, including possible licence restrictions, suspension, cancellation, or taking possession.
67. (1) Where a financial service provider is significantly undercapitalised, the Bank shall take any of the following actions against the financial service provider: (a) any action specified in section 66; (b) direct the board to rectify its significant under-capitalisation within ninety days and restore capital adequacy within one hundred and eighty days or within such shorter period as the Bank may direct; (c) restrict or vary the financial service provider’s licence; (d) suspend the financial service provider’s licence; (e) cancel the financial service provider’s licence; or (f) take possession of the financial service provider. (2) The Bank shall prescribe what constitutes significantly under-capitalised for the purposes of this section. (3) The Bank shall, in writing, inform the Minister of the state of affairs of a bank or financial institution in respect of which the Bank has taken supervisory action in accordance with this section. - 68 Verify source ↗
Corrective actions against financial businesses
The Bank may take supervisory actions against a financial business if it considers those actions appropriate and necessary.
68. (1) The Bank may take any of the supervisory actions, specified in this Act, against a financial business where it considers it appropriate and necessary so to do. (2) The corrective actions, specified in sections 66 and 67, shall take precedence over any discretionary corrective actions available to the Bank as specified in this Act or any other law. - 69 Verify source ↗
Modification, cancellation and upholding of regulatory
The Bank may modify, cancel, or uphold certain regulatory statements about a financial service provider, and may impose conditions when it modifies or cancels them.
69. The Bank may, on representation made by a person, financial service provider or on its own motion, modify, cancel or uphold a regulatory statement issued specifically for or against a financial service provider and, on such modification or cancellation, impose conditions that the Bank considers necessary or appropriate in the matter. - 70 Verify source ↗
Notice of taking possession
When the Bank takes possession of a financial service provider, it must post a notice in each branch stating that it is taking possession and giving the effective date and time. If the taking of possession is pursuant to insolvency, it must also send a copy of the notice to the Court.
70. When taking possession of a financial service provider, the Bank shall post in each branch of the financial service provider concerned a notice announcing its action and specifying the date, hour and minute at which the possession takes effect and if the taking of possession is pursuant to an insolvency the Bank shall transmit a copy of the notice to the Court. Banking and Financial Services [No. 7 of 2017 233 - 71 Verify source ↗
Powers and duties of Bank on taking possession
When the Bank takes possession of a financial service provider, it gets full control and several management powers.
71. The Bank shall, on taking possession of a financial service provider, be vested with full and exclusive powers of management and control of the financial service provider and shall have the power to— Powers and duties of Bank on taking possession (a) dissolve the board; (b) continue or discontinue any operations; (c) borrow money, on the security of the assets of the financial service provider or not on such security; (d) suspend the payment of any obligation, including interest; (e) employ, reemploy, retain in employment, or terminate the employment of a senior officer, other employee of the financial service provider or professional advisor, where the Bank considers necessary; (f) execute an instrument in the name of the bank or financial institution and conduct in the name of the bank or financial institution any action or legal proceeding; (g) terminate the interests of shareholders and refer the determination of the value of the interest to the Court or an arbitrator; (h) enforce the personal liability of the directors and shareholders of the financial service provider incurred in the ordinary course of business and on unpaid shares; and (i) take any other appropriate action specified in this Act. - 72 Verify source ↗
Statement of affairs of assets and liabilities on taking
The Bank must prepare a statement of the assets and liabilities of a financial service provider when it takes possession of that provider.
72. The Bank shall, on taking possession of a financial service provider, prepare a statement of affairs of the assets and liabilities of the financial service provider, within ninety days from the effective date of taking possession, in order to determine whether the financial service provider is solvent or insolvent. Statement of affairs of assets and liabilities on taking possession - 73 Verify source ↗
Actions where financial service provider is solvent
If a financial service provider is shown to be solvent, the Bank must choose and carry out one of the listed actions.
73. Where a statement of affairs of the assets and liabilities of a financial service provider, made in accordance with section 72 shows the financial service provider is solvent, the Bank shall— (a) restructure or reorganise the financial service provider; (b) sell the financial service provider as a going concern; (c) close the financial service provider; (d) transfer all or part of the business of the financial service provider to a bridge bank; Actions where financial service provider is solvent 234 No. 7 of 2017] Banking and Financial Services (e) initiate a purchase and assumption transaction; (f) dispose of some of the assets of the financial service provider; or (g) take an action that the Bank considers necessary to enable the Bank carry out its functions in accordance with this Act. Actions where financial service provider is insolvent - 74 Verify source ↗
Actions where financial service provider is insolvent
If an insolvency statement shows a financial service provider is insolvent, the Bank must take listed action(s), including liquidation-related steps; if the provider is systemically important, the Bank may instead place the institution under temporary public control with the Minister’s consultation.
74. (1) Where a statement of affairs of the assets and liabilities, made in accordance with section 72, shows that the financial service provider is insolvent, the Bank shall take the following actions: (a) place the financial service provider under compulsory liquidation; Application to Court for termination of possession Effects of possession (b) exercise any of the powers in section 73; or (c) with respect to a financial business, revoke the financial business licence and recommend to the appropriate authority to place the financial business, into liquidation. (2) Despite the provisions of subsection (1), where a financial service provider is systemically important, the Bank in consultation with the Minister, may place the institution under temporary public control. - 75 Verify source ↗
Application to Court for termination of possession
A financial service provider, or someone acting for it, may go to court within 21 days after the Bank takes possession to ask the Bank to show cause why that possession should end.
75. A financial service provider or any interested person acting on its behalf may, within twentyone days after the date on which the Bank takes possession of the financial service provider, institute proceedings in Court to require the Bank to show cause why the possession of the financial service provider should not be terminated. - 76 Verify source ↗
Effects of possession
When the Bank takes possession of a financial service provider, several pre-possession claims, liens, and transfers are affected.
76. (1) Where the Bank takes possession of a financial service provider— (a) despite the provisions of any other relevant law relating to extension of time, any term, whether statutory or contractual, on the expiration of which a claim or right of the financial service provider would expire or be extinguished, shall be extended by six months from the date of such expiration; (b) an attachment or lien, except for an attachment or lien existing twelve months prior to the taking possession of the financial service provider, shall be vacated; (c) an attachment or lien shall not attach to assets or property of the financial service provider during the period that the possession continues, except an attachment or lien created— Banking and Financial Services [No. 7 of 2017 235 (i) (ii) by the Bank in carrying out its role of lender of last resort; or in favour of a payment system, settlement system or settlement in netting or gross settlement arrangement; (d) every payment or transfer of an asset or property of the financial service provider made with intent to effect a preference of the recipient over the other creditors of a financial service provider or at less than the appraised book value, shall be void, if made within a period of twelve months before the Bank takes possession of the financial service provider; (e) a gratuitous transfer of any asset of the financial service provider made within twelve months before the possession by the Bank shall be void and all assets shall be surrendered to the Bank; and (f) any lending to a senior officer, other employee of the financial service provider, director or any associated person on preferential terms or without adequate security made within six months prior to the possession of the financial service provider may be rescinded and that senior officer, other employee of the financial service provider or associated person shall immediately refund the moneys advanced and interest accrued, at the prevailing rate at the time of possession, to the financial service provider. (2) Where a payment or transfer, referred to in subsection (1)(d), has the effect of preferring the recipient, it shall be presumed to have been made with that intent, except in the case of a— (a) payment made to a creditor in the ordinary course of business to discharge in whole or in part a debt or other liability of the financial service provider to the creditor; or (b) transfer of an asset or property made in a current exchange for valuable consideration equal to the fair market value of the asset or property transferred. - 77 Verify source ↗
Restructuring and reorganisation
When the Bank starts a restructuring or reorganisation of a financial service provider, it must send the plan to affected depositors and creditors and give interested parties a hearing. The plan notice must also say the Bank will proceed unless the plan is rejected in writing within 30 days.
77. (1) Where the Bank, acting in accordance with section 73 (a) commences a restructuring or reorganisation, or both, of a financial service provider, the Bank shall, after granting a reasonable opportunity for a hearing to all interested parties, develop and send a copy of the restructuring or reorganisation plan to eachdepositor and any other creditor who, under the plan,would not receive full payment. Restructuring and reorganisation 236 No. 7 of 2017] Banking and Financial Services (2) A copy of a restructuring or reorganisation plan, specified in subsection (1), shall be accompanied by a notice stating that the Bank shall proceed to carry out the restructuring or reorganisation, if the plan is not rejected, in writing, within thirty days— (a) by persons holding at least one third of the aggregate amount of the deposits; (b) creditors comprising at least onethird in value of the aggregate of the claims of creditors, other than subordinated creditors; or (c) if within that period, no objection or appeal to the Court has been made and the Court does not order a stay of proceedings. Refusal of restructuring or reorganisation - 78 Verify source ↗
Refusal of restructuring or reorganisation
If depositors and other creditors reject a restructuring or re-organisation plan, or if the plan becomes inequitable or impossible or undesirable to اجراute, the Bank may modify the plan or order compulsory liquidation of the financial service provider.
78. Where depositors and other creditors reject a restructuring or re-organisation plan developed by the Bank, in accordance with section 77, or when in the course of a restructuring or reorganisation it appears to the Bank that circumstances render the plan inequitable or its execution impossible or undesirable, the Bank may— (a) modify the plan; or (b) order the compulsory liquidation of the financial service provider in accordance with Part X. Restriction on execution of judgment - 79 Verify source ↗
Restriction on execution of judgment
A creditor cannot keep the benefit of an execution or similar attachment against a financial service provider’s property once the Bank has possession, unless the execution or attachment was completed at least 12 months before that effective date.
79. (1) A writ of execution, attachment, garnishee order or other process of a similar nature shall not be issued or made against the assets or property of a financial service provider which is in the possession of the Bank. (2) Where a creditor has issued or made a writ of execution or attachment, garnishee order or other process of a similar nature against the movable or immovable property of a financial service provider or has attached a debt due to the financial service provider, the creditor is not entitled to retain the benefit of the execution or attachment, unless the creditor has completed the execution or attachment twelve months before the effective date of the Bank taking possession of the financial service provider. Recovery of expenses - 80 Verify source ↗
Recovery of expenses
The financial service provider must pay the Bank’s necessary and reasonable expenses, costs, and charges incurred in applying this Part.
80. All necessary and reasonable expenses, costs and charges incurred by the Bank in the application of this Part shall be defrayed from the funds of the financial service provider. Banking and Financial Services [No. 7 of 2017 237 PART VII RESTRICTIONS ON TRANSACTIONS OF FINANCIAL SERVICE PROVIDERS
Part
PART VII
- 81 Verify source ↗
Secured borrowing
Banks and financial institutions must not grant security over their assets except in the ordinary course of business or to the Bank for short-term liquidity advances, and they must not buy encumbered assets unless doing so to satisfy a debt or liability owed to them.
81. (1) A bank or financial institution shall not— (a) mortgage, charge or grant security toany person over an asset of a bank or financial institution other than— Secured borrowing (i) (ii) in the ordinary course of its business; or to the Bank in order to secure short term liquidity advances made by the Bank in accordance with the Bank of Zambia Act; or Cap. 360 Limitations on granting credit facilities (b) acquire an asset that is subject to a mortgage, charge or other security interest in favour of any person, except to satisfy a debt or liability to the bank or financial institution. (2) Despite subsection (1) a bank or financial institution shall not enter into a lending agreement that authorises the lender to place the bank or financial institution into receivership. - 82 Verify source ↗
Limitations on granting credit facilities
Banks and financial institutions must not make certain large loans, guarantees, advances, or related-party exposures beyond specified capital limits.
82. (1) A bank or financial institution shall not, directly or indirectly— (a) except as the Bank may prescribe, grant a credit facility or guarantee a debt of a person or common enterprise so that the total value of the credit facility and guarantee, in respect of a person or common enterprise, is more than twentyfive percent of the regulatory capital of the bank or financial institution; (b) grant a credit facility against the security of its own shares or of those of a company affiliated to it; (c) except with the prior written approval of the Bank, and on such terms and conditions as may be prescribed by the Bank, grant or permit to be outstanding any secured or unsecured grants, advances and guarantees which are more than five percent of common equity tier one capital of the bank or financial institution, to (i) its directors, whether such advances are obtained by the directors individually, jointly or severally; (ii) a person that has control of the bank or financial institution; or 238 No. 7 of 2017] Banking and Financial Services (iii) a body of persons in which one or more of its directors has control or is a director, partner, manager, agent or member; or (d) grant or permit to be outstanding to a senior officer or other employee of the bank or financial institution, unsecured advances that on aggregate exceed the respective annual remunerations of the senior officer or other employee, except with the prior written approval of the Bank and on such terms and conditions as the Bank may prescribe. (2) The total value of grants, credit facilities and guarantees, specified in subsection (1), shall not exceed twenty-five percent of the regulatory capital. (3) Where the Bank, in imposing the limitations specified in subsections (1) and (2), determines that a group of two or more persons to whom a grant, credit facility or guarantee has been or shall be made, is a common enterprise or is so interrelated that the group should be considered as a unit, the Bank may, by notice, direct that the total indebtedness of that group shall be combined and shall be deemed to be the indebtedness of a single person. (4) A bank or financial institution shall not be considered as having contravened subsection (1) or (2) by virtue of a determination, made in accordance with subsection (3), if the bank or the financial institution disposes of the indebtedness of the group to the extent that the indebtedness exceeds the relevant limitation within such reasonable time as the Bank may determine. - 83 Verify source ↗
Restriction on trade
Banks and financial institutions must not carry on unlicensed trade or business unless the Bank gives prior written approval, with a narrow exception for debt recovery.
83. A bank or financial institution shall not, directly or indirectly, without the prior written approval of the Bank and on such terms and conditions as may be prescribed, engage in any trade or business for which it is not licensed, except where it is necessary for a period not exceeding twelve months or such longer period as the Bank may allow, to secure any debt due to the bank or financial institution. - 84 Verify source ↗
Restriction on equity investments
Banks and financial institutions are restricted from buying or holding certain equity interests beyond set limits, unless an exception applies or the Bank gives prior written approval.
84. (1) A bank or financial institution shall not, directly or indirectly, without the prior written approval of the Bank and on such terms and conditions as may be prescribed, acquire ownership of an interest in a commercial, agricultural, industrial or other business undertaking, except as an interest that is necessary for securing or satisfying a debt or other liability payable to the bank or the financial institution and which is disposed of within two years or subsequently extended with the prior written approval of the Bank. Restriction on trade Restriction on equity investments Banking and Financial Services [No. 7 of 2017 239 (2) A bank or financial institution shall not invest in an equity interest in a person, property or undertaking in an amount exceeding fifteen percent of the total of all equity interests in the person, property or undertaking. (3) The aggregate investment in equity interests of a person, property or undertaking by the bank or financial institution shall not exceed fifteen percent of its primary capital. (4) A bank or financial institution shall not acquire an equity interest in a person, property or undertaking where the value of the bank or financial institution’s equity exceeds fifteen percent of its primary capital. (5) A bank or financial institution shall not acquire an equity interest in a person, property or undertaking in which an insider has a related interest that exceeds ten percent of the bank or financial institution’s primary capital. (6) Subsection (2) does not apply to an investment by a bank or financial institution in the shares of its subsidiary or proposed subsidiary where the— (a) equity interest in the subsidiary is less than fiftyone percent of the total equity interests in the subsidiary; or (b) aggregate of the equity investments by the bank or financial institution is less than fifteen percent of its primary capital. (7) Despite subsection (6), the Bank may approve the holding of more than fifty-one percent equity interest in a subsidiary on such terms and conditions as the Bank may determine. (8) Subsection (2) does not apply to the acquisition by a bank or financial institution of an equity interest in the realisation of any part of collateral provided to the bank or financial institution in a credit transaction, if the bank or financial institution disposes of equity interest, in excess of the limits imposed by this section, within two years following its acquisition or such longer period as the Bank may determine.
Part
part of collateral provided to the bank or financial institution in a
- 85 Verify source ↗
Restriction on lease or other interest in real property
Banks and financial institutions may acquire real property only for listed business-related purposes, and some property transactions need the Bank’s prior written approval.
85. (1) A bank or financial institution may acquire an interest in real property if the acquisition is necessary for— (a) conducting business, making provision for future expansion or providing housing for its senior officers and other employees; or (b) securing or satisfying a debt or other liability to it, which is disposed of within two years or subsequently continued with the prior written approval of the Bank. Restriction on lease or other interest in real property 240 No. 7 of 2017] Banking and Financial Services (2) Abank or financial institution shall not, directly or indirectly, without the prior written approval of the Bank and on such terms and conditions as the Bank may prescribe— (a) purchase, lease or acquire an interest in real property; or (b) lease or make available any personal property owned by the bank or financial institution in consideration of periodicpayments, rent or other instalment payments. (3) Nothing in this subsection shall prevent a bank or financial institution from lending and taking title to personal property for the purpose of satisfying a debt or obligation to a bank or financial institution, if the lease or other arrangement is disposed of within two years or subsequently continued with the prior written approval of the Bank. - 86 Verify source ↗
Limits, restrictions and prohibition on financial business and
The Bank may set, change, and enforce limits, restrictions, and prohibitions for financial business and alternative financial services, and may exempt certain alternative financial services providers on application.
86. (1) Subject to this Part, the Bank may adopt, vary or amend the limits, restrictions and prohibitions with regard to the financial business and alternative financial services. (2) Despite subsection (1) the Bank may— (a) establish lending and other limits, impose restrictions and prohibitions on financial businesses and may prescribe different limits for different categories of financial businesses; and (b) on application by a financial service provider, in the prescribed manner and form, exempt a financial service provider offering alternative financial services from some provisions of this Part, in a prescribed manner and form. Limits, restrictions and prohibition on financial business and alternative financial services Exemption of alternative financial services - 87 Verify source ↗
Exemption of alternative financial services
The Bank may exempt an alternative financial services provider from some provisions of this Part if the provider applies in the prescribed manner and form.
87. The Bank may, on application by a financial service provider, in the prescribed manner and form, exempt that financial service provider offering alternative financial services from some provisions of this Part. PART VIII FINANCIAL STATEMENTS AND ACCOUNTABILITY Annual financial statement
Part
PART VIII
- 88 Verify source ↗
Annual financial statement
A board must keep proper records and prepare annual financial statements, and the financial service provider must send audited statements to shareholders and the Bank on time.
88. (1) A board shall ensure that proper books of account and other records relating to the operations of the financial service provider are kept. (2) A board shall prepare, for each financial year, financial statements, accounts and reports in accordance with international accounting standards as recognised by the Zambia Institute of Chartered Accountants and rules issued by the Bank in accordance with this Act. Banking and Financial Services [No. 7 of 2017 241 (3) A financial service provider shall, not later than twentyone days before the date of an annual general meeting, send to each shareholder and to the Bank a copy of its audited financial statement for the preceding financial year. (4) A board shall, not more than three months after the close of the financial year, send a copy of the audited financial statements to the Bank, together with any report made by an external auditor, including a management letter or other communication prepared in accordance with internationally accepted standards as specified in subsection (2). (5) The Bank may, on receipt of a financial service provider’s audited financial statement, as provided in subsection (5), direct that a trilateral meeting be held by the Bank with a financial service provider and the external auditor of the financial service provider, subject to the Bank’s supervisory responsibilities that may have arisen in the course of a statutory audit. (6) Where a financial service provider fails to comply with subsection (3), the annual general meeting shall be adjourned until such time as the financial service provider complies with the subsection. - 89 Verify source ↗
Presentation of annual financial statement to shareholders
The board must present required statements, reports, and information to shareholders at the annual general meeting, and the financial statements and reports must be true and accurate.
89. (1) A board shall present to the shareholders, at an annual general meeting, all statements, reports and information that are required to be presented to shareholders at an annual general meeting as provided in the Companies Act, 2017, including— (a) a directors’ report, containing the following information: (i) common enterprise and related party transactions; (ii) risk management processes and practices; (iii) disclosed directors’ interests; and (iv) the existence of prohibited borrowings or lendings; (b) an audited report of its financial statements for the financial year; (c) a list of subsidiaries, other than subsidiaries acquired on a realisation of security, showing with respect to each subsidiary— (i) its name and the address of its head or principal office; Presentation of annual financial statement to shareholders Act No. of 2017 242 No. 7 of 2017] Banking and Financial Services (ii) the book value in the aggregate of any shares of the subsidiary that is beneficially owned by the financial service provider and any other subsidiaries of the financial service provider; and (iii) the percentage of the voting shares of the subsidiary that is beneficially owned by the financial service provider and other subsidiaries of the financial service provider; and (d) any information that may be provided in this Act or prescribed by the Bank in accordance with this Act or any other written law. (2) Financial statements and reports, referred to in subsection (1), shall be a true and accurate representation of the financial service provider’s financial position as at the end of the financial year, including the results of the operations and changes in the financial position of the financial service provider for the financial year. - 90 Verify source ↗
Reserve for bad and doubtful debts
A financial service provider’s annual financial statements must comply with the regulatory statements made under this Act about reserves for bad and doubtful debts.
90. A financial service provider’s annual financial statements shall comply with the regulatory statements, issued in accordance with this Act, for creation or variation of appropriate reserves for bad and doubtful debts. - 91 Verify source ↗
Approval of annual financial statements
The board must approve the financial service provider’s annual financial statements, and the approved statements must be signed by at least two directors.
91. (1) A board shall approve the annual financial statements of the financial service provider. (2) The annual financial statements, approved in accordance with subsection (1), shall be signed by at least two directors. Reserve for bad and doubtful debts Approval of annual financial statements Publication of annual financial statements - 92 Verify source ↗
Publication of annual financial statements
A financial service provider must publish quarterly and audited annual financial statements in a newspaper of general circulation in Zambia and display copies in each branch when open.
92. (1) A financial service provider shall publish, in a newspaper of general circulation in Zambia, its quarterly financial statement and audited annual financial statements. (2) The Bank shall prescribe the manner and form of publication of the financial statements referred to in subsection (1). (3) A financial service provider shall display, in a conspicuous place in each branch, at all times when the branch is open for business, a copy of the financial service provider’s quarterly and audited annual financial statements. Appointment of external auditor - 93 Verify source ↗
Appointment of external auditor
Financial service providers must appoint an external auditor at the start of each financial year, pay the auditor as agreed with the board, and follow auditor qualification and appointment rules set by the Bank.
93. (1) A financial service provider shall appoint, at the beginning of each financial year, an external auditor. (2) An external auditor, appointed in accordance with subsection (1), shall be a member of the Zambia Institute of Chartered Accountants, and meet such other conditions as the Bank may prescribe. Banking and Financial Services [No. 7 of 2017 243 Responsibilities of external auditor (3) The Bank shall prescribe term of appointment of an auditor and an engagement partner. (4) A financial service provider shall pay an external auditor remuneration as agreed with the board. (5) An external auditor of a financial service provider shall be the external auditor of a subsidiary of the financial service provider. (6) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding one year, or to both. (7) The Bank may exempt certain types of financial businesses from the requirements of this section. - 94 Verify source ↗
Responsibilities of external auditor
An external auditor must audit a financial service provider’s statements, report to shareholders, give an opinion, and report serious findings to the Bank within 14 days.
94. (1) An external auditor shall audit the financial statements of a financial service provider and make a report to the shareholders of the financial service provider and express an opinion, in accordance with this Act, any other written law and standards promulgated by the Zambia Institute of Chartered Accountants on the— (a) annual balance sheet, profit and loss account and other financial statements required to be submitted by the financial service provider in accordance with this Act; and (b) compliance of the financial service provider with the requirements of this Act or other relevant written law, with respect to the accounts. (2) An external auditor who, in the course of carrying out duties, as specified in subsection (1), finds that a financial service provider— (a) is insolvent or is likely to become insolvent; or (b) has contravened a requirement of this Act, a regulation, rule, guideline or regulatory statement issued in accordance with this Act, or a condition imposed by the financial service provider’s licence; shall report the finding, in the prescribed manner and form, to the Bank, within fourteen days of the finding. (3) An external auditor that communicates in good faith with the Bank on a matter to which this section applies, is not in breach of a duty owed to a financial service provider. 244 No. 7 of 2017] Banking and Financial Services Information by external auditor to Bank - 95 Verify source ↗
96. Disqualification of external auditor
The Bank may require an external auditor to provide information about a financial service provider, its subsidiary, or affiliate. An external auditor who refuses, fails, neglects, or gives false or misleading information commits an offence and may be fined or imprisoned.
95. (1) The Bank may, by notice to an external auditor of a financial service provider, whether current or in the past, require the external auditor to provide information about the financial service provider, a subsidiary or an affiliate of the financial service provider. (2) An external auditor who, being required to provide information as provided in subsection (1)— (a) fails, refuses or neglects to provide the information; or (b) provides false or misleading information; commits an offence and is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding one year, or to both. Disqualification of external auditor - 96 Verify source ↗
Disqualification of external auditor
A financial service provider must not appoint certain conflicted persons or entities as its external auditor.
96. A financial service provider shall not appoint a person as an external auditor of that financial provider if that person is— Access to information and auditor’s report (a) a director, senior officer or other employee of the financial service provider or of any person associated or affiliated with the financial service provider; (b) an associate of a director or senior officer; (c) a body corporate; or (d) a person who personally, or through that person’s partner or employee, regularly performs the duties of secretary or book keeper to the financial service provider. - 97 Verify source ↗
Access to information and auditor’s report
An external auditor of a financial service provider can access the provider’s books, accounts and records and can require information and explanations from directors, senior officers and agents. The board must send the auditor’s report and the annual financial statement to the Bank and each shareholder within three months after the financial year ends.
97. (1) An external auditor of a financial service provider has the right of access to all books, accounts and records of a financial service provider and is entitled to require from its directors, senior officers and agents such information and explanations that the external auditor requires to perform the external auditor’s duties and responsibilities as provided in this Act and any other relevant law. (2) A report made for the purposes of this Act by an external auditor shall— (a) express whether, in the external auditor’s opinion, the financial service provider made available all information necessary for the external auditor to comply with the requirements of this Act or other relevant law; (b) state whether, in the external auditor’s opinion, any of the statements in the annual financial statement — Banking and Financial Services [No. 7 of 2017 245 (i) is fully, fairly and properly drawn up; (ii) exhibits a true and fair statement of the financial service provider’s financial condition; and (iii) requires an explanation or information from the board, senior officer or agent of the financial service provider or a satisfactory response has been received; (c) state whether in the external auditor’s opinion the financial service provider has complied with the provisions, regulations, rules, regulatory statements specified in or under this Act and any other relevant law; and (d) state the transactions or conditions that have come to the attention of the auditor affecting the wellbeing of the financial service provider that, in the opinion of the external auditor, are not satisfactory and require rectification including— (i) any transaction of the financial service provider that has come to the attention of the external auditor and which, in the opinion of the external auditor, has not been within the powers of the financial service provider or which was contrary to this Act or any other law; and (ii) a non-performing loan that is outstanding, has been restructured or the terms of repayment have been extended, if the principal amount of the loan is five percent or more of the regulatory capital of the financial service provider. (3) A board shall submit a copy of the report of the external auditor, together with a copy of the annual financial statement, to the Bank and each shareholder of the financial service provider, within a period of three months from the end of a financial year. - 98 Verify source ↗
Termination of appointment of external auditor
The Bank can dismiss an external auditor of a financial service provider for failure to perform duties, and the provider must appoint a replacement if that happens.
98. (1) The Bank may cause the dismissal of an external auditor to a financial service provider for failure to perform duties and responsibilities, in accordance with this Act, or auditing standards approved by the Zambia Institute of Chartered Accountants. Termination of appointment of external auditor (2) Where an external auditor to a financial service provider is dismissed, in accordance with subsection (1), the financial service provider shall appoint another external auditor, subject to meeting the conditions prescribed by the Bank. 246 No. 7 of 2017] Banking and Financial Services Statement on resignation of external auditor Termination of appointment of external auditor by financial service provider (3) Where a financial service provider fails to comply with subsection (2), the Bank shall order the dismissal of the external auditor. - 99 Verify source ↗
Statement on resignation of external auditor
If an external auditor of a financial service provider resigns, the auditor must give the Bank a written statement explaining the reasons within 10 days after giving the resignation to the financial service provider.
99. Where an external auditor of a financial service provider resigns, the external auditor shall prepare and deliver to the Bank, a written statement specifying the reasons for the resignation, within ten days after submission to the financial service provider of the auditor’s resignation. - 100 Verify source ↗
Termination of appointment of external auditor by financial
If a financial service provider ends an external auditor’s appointment, it must send written reasons to the Bank and the auditor within 10 days. The auditor may then send a written response to both within 10 days of receiving that statement.
100. (1) Where a financial service provider terminates the appointment of an external auditor, the financial service provider shall submit to the Bank and the external auditor, within ten days of the decision to terminate the appointment, a written statement setting out the reasons for the termination. (2) An external auditor may, within ten days of receiving the statement referred to in subsection (1), submit to the Bank and the financial service provider a written statement responding to the reasons set out by the financial service provider. PART IX ANTI-COMPETITIVE ACTIVITIES AND CONSUMER PROTECTION Collusive conduct
Part
PART IX
- 101 Verify source ↗
Collusive conduct
A financial service provider must not make anti-competitive agreements or arrangements with another financial service provider on interest rates, charges, customer allocation, service provision, or restricting competition, except for specified types of arrangements.
101. (1) Subject to subsection (3), a financial service provider shall not make an agreement or arrangement with another financial service provider with respect to the— (a) rate of interest to be levied on a deposit; (b) rate of interest or charge levied on a credit facility; (c) amount of a charge for the provision of a financial service; (d) provision of, or refusal to provide, banking or financial services to a person; (e) division of markets by allocating customers; or (f) provision of banking or financial services in a manner that restricts competition in the financial sector. (2) A financial service provider that contravenes subsection (1) commits an offence and is liable, upon conviction, to a fine not exceeding three hundred thousand penalty units or to imprisonment for a term not exceeding three years, or to both. (3) Subsection (1) does not apply to an agreement or arrangement— Banking and Financial Services [No. 7 of 2017 247 (a) for the performance of a banking or financial service by a financial service provider to another; (b) evidencing a syndication or agreement for the provision of banking or financial services to a person by two or more financial service providers; (c) for the underwriting or distribution of security by a bank or financial institution or a group of persons, including a financial service provider; or (d) for the exchange of statistics or audit information, the development and use of systems, forms, methods, procedures and standards, the use of common facilities, joint research and the development or any matter regarding the same. - 102 Verify source ↗
Collateral contracts
A financial service provider must not force a customer to buy another service as a condition for getting a banking or financial service.
102. (1) A financial service provider shall not compel a person to contract for another service with the financial service provider or another person as a condition for receiving a banking or financial service from the financial service provider. Collateral contracts (2) A financial service provider that contravenes subsection (1) commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or imprisonment for a term not exceeding five years, or to both. - 103 Verify source ↗
Coercive behaviour
A financial service provider must not force a customer to use a chosen supplier, or harass, oppress, abuse, or mislead a person when collecting a debt.
103. A financial service provider shall not compel a customer to use the financial service provider’s choice of a supplier of any service or goods. Coercive behaviour 104 (1) A financial service provider shall not harass, oppress or abuse a person in the collection of a debt. Misconduct during debt collection (2) A financial service provider shall not use false, deceptive or misleading representation or means when collecting a debt. - 105 Verify source ↗
Determination of benchmark base rate
The Bank may set a benchmark interest rate, and financial service providers must charge customers that rate.
105. The Bank may prescribe the benchmark interest rate that a financial service provider shall charge customers. Determination of benchmark base rate - 106 Verify source ↗
Disclosure of interest rates and charges
Financial service providers must give customers written disclosure of account charges and interest when opening a new account, and must disclose borrowing costs in writing before making a loan or credit available.
106. (1) A financial service provider shall, at the time of opening a new account for a customer, provide a customer with a written statement of the— Disclosure of interest rates and charges (a) charges for maintaining, and accessing funds on the account; 248 No. 7 of 2017] Banking and Financial Services (b) interest, if any, to be paid to the customer by the financial service provider; and (c) manner in which the financial service provider shall inform the customer of new charges or changes in the charges or interest specified. (2) A financial service provider that agrees to make a loan or credit available to a person shall, before making the loan or credit, disclose the cost of borrowing to the person in writing. (3) The Minister, in consultation with the Bank, may prescribe the manner and form, and content of information, required to be disclosed by a financial service provider under this section. - 107 Verify source ↗
Increase in service charges
A financial service provider must get the Bank’s prior written approval before adding a new charge or raising an existing charge for retail customers or MSMEs.
107. A financial service provider shall, before introducing a new charge, or increasing the rate of an existing charge for retail customers or micro, small and medium scale enterprises, apply for the prior written approval of the Bank. - 108 Verify source ↗
Responsible lending
A financial service provider must assess a customer’s ability to repay before advancing credit, and must not advance credit if the customer’s monthly debts exceed the limit set by the Bank.
108. (1) A financial service provider shall, before advancing a credit facility to a customer, assess and determine the customer’s ability to pay the credit, based on the customer’s current and expected income, current obligations, employment status, other financial resources or assets to be given as security. (2) A financial service provider shall not advance a credit facility to a customer whose total monthly debts due on outstanding obligations, including amounts under credit facility, exceed a limit prescribed by the Bank. (3) A financial service provider that contravenes this section commits an offence. Increase in service charges Responsible lending Prohibition against penal interest - 109 Verify source ↗
Prohibition against penal interest
A financial service provider must not charge a borrower extra penalties for missing loan repayments, except for specified interest, collection costs, and security-protection costs.
109. (1) A financial service provider shall not impose on a borrower a charge or penalty as a result of the failure by the borrower to repay or pay in accordance with the contract governing the loan other than— (a) interest on an overdue payment on a loan; (b) legal costs incurred in collecting or attempting to collect a payment on a loan; or (c) costs, including legal costs, incurred in protecting or realising the security on a loan. (2) A financial service provider that contravenes subsection (1) commits an offence. Banking and Financial Services [No. 7 of 2017 249 - 110 Verify source ↗
Recoverable amounts on non-performing loan
A financial service provider must recover specified amounts from a borrower on a non-performing credit facility.
110. (1) A financial service provider shall recover the following amounts from a borrower on a non-performing credit facility: (a) the principal amount owing when the credit facility becomes non-performing; Recoverable amounts on non- performing loan (b) any interest in arrears due in accordance with the credit facility agreement but not exceeding the principal amount owing when the loan becomes non-performing; and (c) expenses incurred in the recovery of amounts owed by the borrower. (2) This section does not apply to interest awarded in terms of a Court order or judgment and accruing after the making of the order or judgment. - 111 Verify source ↗
Data protection and disclosure of information
A financial service provider must keep customer-service information confidential and may not disclose it except in listed situations.
111. Subject to the Financial Intelligence Act, 2010, a financial service provider shall maintain the confidentiality of information obtained in the provision of a service to a customer and shall not divulge any information except— (a) in accordance with the express consent of a customer; (b) in compliance with a court order; (c) where the interest of the financial service provider requires disclosure; (d) where the information requested is customer identification data required by another financial service provider for the purpose of conducting a due diligence; or (e) where the Bank, in the performance of its functions as provided in this Act, so requests or directs. Data protection and disclosure of information Act No. 46 of 2010 - 112 Verify source ↗
Prohibition of anti-competitive practice
A financial service provider must not engage in anti-competitive practices.
112. (1) A financial service provider shall not engage in anti- competitive practices. (2) A financial service provider that enters into an agreement, or makes a decision or engages into a concerted practice whose objective or effect is to prevent, restrict or distort competition to an appreciable extent in the financial sector shall be considered to have engaged in an unsafe and unsound practice. - 113 Verify source ↗
Complaints procedure for customers
A financial service provider must set up written customer complaint procedures, appoint someone to handle them, and keep complaint records for at least two years (or longer if the Bank requires).
113. A financial service provider shall— (a) establish and make available, in writing, to each customer, in the portion of each branch that the public has access to, procedures for dealing with complaints made by a customer; Prohibition of anti- competitive practice Complaints procedure for customers 250 No. 7 of 2017] Banking and Financial Services (b) designate a senior officer or other employee to be a customer service officer responsible for implementing and administering the procedures specified in paragraph (a); and (c) create and maintain for two years, or such longer period as the Bank may prescribe, a record stating the complaints received, when and how they were dealt with or disposed of. Ombudsperson for financial service providers - 114 Verify source ↗
Ombudsperson for financial service providers
The Bank may appoint a Financial Ombudsperson and set how complaints against financial service providers are handled.
114. (1) The Bank may designate or appoint a suitably qualified person as a Financial Ombudsperson to deal with matters relating to consumer protection in banking and financial services under this Act. (2) The Bank may, prescribe the manner of dealing with complaints against financial service providers by their customers. Control of advertisements - 115 Verify source ↗
Control of advertisements
The Bank may make rules about advertisements for financial service providers and may direct changes or stopping publication if an ad breaks the rules or is false or misleading.
115. (1) The Bank may make rules in respect of the publication, form and content of advertisements relating to a financial service provider. (2) Rules made in accordance with subsection (1) may— (a) prohibit the publication of advertisements of any description, whether by reference to their contents, to the persons by whom they are published or otherwise; (b) make provision as to the matters which should or should not be included in such advertisements; (c) provide for any exemptions from any requirement imposed by this Act; and (d) provide for offences and penalties for the breach of any requirement of the rules. (3) The Bank shall give such directives to the person who has published or caused to be published the advertisement as it considers appropriate in the circumstances, where it appears to the Bank that an advertisement made in accordance with this section— (a) fails to comply with any requirement imposed in the rules made in terms of this section; or (b) is false or misleading. (4) A directive given, in terms of subsection (1), may require— (a) a person to modify the advertisement, in whole or in part; or (b) the publication of the advertisement to cease. Banking and Financial Services [No. 7 of 2017 251 (5) Nothing in this section shall prejudice any remedy that an aggrieved person may have against a person who published or caused to be published an advertisement contrary to the requirements of the rules made in accordance with this section. (6) A person who contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or imprisonment for a term not exceeding five years, or to both. - 116 Verify source ↗
Prohibition of unfair business practices
A financial service provider must not engage in unfair business practices.
116. (1) Afinancial service provider shall not engage in an unfair business practices. (2) For purposes of this section, “unfair business practice” means— (a) a practice that is likely to mislead consumers in making decisions; (b) a practice that compromises the standard of honesty and good faith which a financial service provider can reasonably be expected to meet; or (c) a practice which places pressure on consumers and distorts their decisions, by use of harassment or coercion. Prohibition of unfair business practices - 117 Verify source ↗
Prohibition of charges on prepayment
A financial service provider must not charge a borrower for prepaying principal early in the stated circumstances.
117. (1) A financial service provider shall not impose a charge or penalty on a borrower for making a prepayment of the principal or an instalment of the principal before its due date where— Prohibition of charges on prepayment (a) the amount of repayment exceeds an amount to be determined by the Bank or extinguishes the debt; (b) a loan is made to a natural person; and (c) the loan is not secured by a mortgage on real property. (2) A financial service provider that contravenes subsection (1) commits an offence. - 118 Verify source ↗
Unfair contract terms
Unfair terms in a customer contract with a financial service provider are not binding on the customer.
118. (1) An unfair term in a contract concluded with a customer by a financial service provider shall not be binding on the customer. (2) A contractual term shall be regarded as unfair if— (a) it has not been individually negotiated; and (b) contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the customer. Unfair contract terms - 119 Verify source ↗
Recognition of other laws
This Part does not override other laws in force on competition, consumer protection, or fair trade.
119. The provisions of this Part are without prejudice to any other law in force on the promotion of competition, consumer protection and fair trade. Recognition of other laws 252 No. 7 of 2017] Banking and Financial Services Acceptance of deposits by insolvent financial service providers Act No. of 2017 Resolution to voluntarily wind-up or dissolve financial service provider Act No. of 2017 PART X INSOLVENCY, DISSOLUTION AND LIQUIDATION OF FINANCIAL SERVICE PROVIDERS
Part
PART X
- 120 Verify source ↗
Acceptance of deposits by insolvent financial service
An insolvent financial service provider must not take deposits or start/keep operating banking or financial service business, except for actions needed to realise, conserve, or preserve its assets.
120. (1) Despite the Corporate Insolvency Act, 2017, or any other law, an insolvent financial service provider shall not— (a) receive deposits; or (b) enter into any new, or continue to conduct existing, banking or financial service business, except that which is necessary or incidental to the orderly realisation, conservation and preservation of the assets of a financial service provider. (2) A transaction with a depositor or a creditor and a settlement in a netting or gross settlement arrangement in accordance with a system of settlement approved by the Bank, or provided for in any other law shall not be treated as prohibited in accordance with subsection (1) by reason only that the insolvency transaction or settlement took place prior to— (a) a resolution to liquidate the financial service provider; or (b) the appointment of a receiver or the taking possession of the financial service provider by the Bank. (3) A director, senior officer or other employee of a financial service provider who knows or, in the proper performance of duties, could reasonably be expected to know of the insolvency of the financial service provider and who causes or permits any act contrary to this section, commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both. - 121 Verify source ↗
Resolution to voluntarily wind-up or dissolve financial service
A financial service provider needs the Bank’s written approval before passing a voluntary winding-up or dissolution resolution, and must submit specified documents when seeking approval.
121. (1) A financial service provider shall not, except with the written approval of the Bank, pass a resolution for the voluntary winding-up or dissolution of the financial service provider in accordance with the Corporate Insolvency Act, 2017, or any other law. (2) A financial service provider seeking the approval of the Bank for voluntary winding-up or dissolution, in accordance with subsection (1), shall submit— (a) a certified copy of the resolution; and Banking and Financial Services [No. 7 of 2017 253 (b) an audited declaration of solvency by the directors to which shall be attached a statement of affairs of the financial service provider showing the— (i) assets and total amount expected to be realised therefrom; (ii) liabilities; and (iii) estimated expenses of the winding-up, made up to the latest practicable date before the resolution to wind-up was made. (3) The Bank shall approve a voluntary winding- up if the Bank is satisfied that the financial service provider is solvent and has sufficient liquid assets to repay its depositors and all its other creditors in full and without delay. (4) Where a bank or financial institution passes a resolution for voluntary winding-up or dissolution, the bank or financial institution shall record the date, hour and minute of the passing of the resolution. (5) A director, senior officer or other employee of a financial service provider who makes a false declaration, causes or permits any false declaration to be made, contrary to subsection (2), commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both. - 122 Verify source ↗
Duties of financial service provider on voluntary winding
If the Bank approves a financial service provider’s voluntary winding up or dissolution, the provider must surrender its licence within 7 days, stop doing business, limit its powers to winding up tasks, and repay depositors and other creditors in full.
122. (1) If a financial service provider receives approval from the Bank for a voluntary windingup or dissolution, the financial service provider shall— (a) surrender its licence to the Bank, within seven days of receipt of the approval, and shall cease to do business and may exercise its powers only to the extent necessary to effect its orderly windingup or dissolution in accordance with the Corporate Insolvency Act, 2017, and this Act; and (b) repay in full its depositors and other creditors. (2) A director, senior officer or other employee of a financial service provider who knows or, in the proper performance of duties, could reasonably be expected to know of the insolvency of the institution and who causes or permits any act contrary to this section, commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both. Duties of financial service provider on voluntary winding- up or dissolution Act No. of 2017 254 No. 7 of 2017] Banking and Financial Services Notice of voluntary winding-up or dissolution Rights of depositors and creditors Distribution of assets on voluntary winding- up or dissolution Act No. of 2017 - 123 Verify source ↗
Notice of voluntary winding-up or dissolution
A financial service provider must notify affected persons within 14 days after approval for a voluntary winding-up or dissolution, keep a copy of the notice at each branch, and publish it in the Gazette and other media in Zambia.
123. (1) A financial service provider shall, within fourteen days after receiving approval for a voluntary winding-up or dissolution, by registered mail, or in the prescribed manner and form notify— (a) every depositor and creditor of the financial service provider of the intended voluntary winding-up or dissolution; and (b) a person entitled to funds or property held by the financial service provider as a trustee, fiduciary, lessor of a safe-keeping facility or bailee, of the proposed winding-up or dissolution. (2) A notice, for the purposes of subsection (1), shall include such information as the Bank may specify. (3) A copy of a notice, specified in subsection (1), shall be kept and displayed in a conspicuous place in the public part of each branch and the financial service provider shall cause the notice to be published in the Gazette and in a newspaper of general circulation or any other media in Zambia. - 124 Verify source ↗
Rights of depositors and creditors
If the Bank approves a voluntary winding-up or dissolution, depositors and creditors keep their right to full payment or return of funds/property, and the financial service provider must pay lawful claims and return held property within the Bank’s written maximum period.
124. (1) An approval by the Bank for the voluntary winding- up or dissolution of a financial service provider as provided in this Part, shall not prejudice the right of a depositor or creditor to payment in full, or to the return of funds or property held, by the financial service provider. (2) All lawful claims shall be paid promptly and all funds and other property held by the financial service provider shall be returned to the rightful owners within such maximum period as the Bank may direct in writing. - 125 Verify source ↗
Distribution of assets on voluntary winding-up or dissolution
Before remaining property is distributed on a voluntary winding-up or dissolution, depositors and other creditors must be paid in full, disputed claims must be funded, and uncollected payable funds must be turned over to the Bank.
125. (1) Where the Bank considers that a financial service provider has discharged all the obligations specified in this Act, the remainder of its property shall be distributed to the shareholders, in accordance with the Corporate Insolvency Act, 2017, and this Act. (2) A distribution shall not be made, in accordance with subsection (1), before— (a) all claims of depositors and other creditors have been paid in full; (b) in the case of a disputed claim, the financial service provider has turned over to the Bank, sufficient funds to meet any liability that may be judicially determined; and Banking and Financial Services [No. 7 of 2017 255 Powers of Bank where assets insufficient or completion unduly delayed Powers of Bank in compulsory winding-up or dissolution Act No. of 2017 (c) uncollected funds, payable to a depositor or creditor, have been turned over to the Bank to be dealt with as unclaimed funds in accordance with this Act. - 126 Verify source ↗
Powers of Bank where assets insufficient or completion
The Bank may take possession of a financial service provider that is being voluntarily wound up or dissolved if it later finds the assets are insufficient or the process has been unduly delayed.
126. The Bank may take possession of the financial service provider being voluntarily wound-up or dissolved, if the Bank subsequently finds out that— (a) the assets of a financial service provider are not sufficient to fully discharge all obligations; or (b) completion of the winding-up or dissolution has been unduly delayed. - 127 Verify source ↗
Powers of Bank in compulsory winding-up or dissolution
The Bank may order a financial service provider’s compulsory winding-up or dissolution and must notify listed parties within 7 days; notified persons may appeal within 30 days, and the Court must decide within 7 days of hearing the appeal.
127. (1) Despite the Corporate Insolvency Act, 2017, or any other law, the Bank may order the compulsory winding-up or dissolution of a financial service provider and shall record the date, hour and minute that the order shall take effect. (2) Within seven days of making an order, in accordance with subsection (1), the Bank shall, in the prescribed manner and form, notify each director, shareholder, depositor, creditor and any other interested party of the order. (3) The persons notified, in accordance with subsection (2), may within thirty days of being notified file an appeal against the order to the Court, which shall state the grounds for the objection or appeal. (4) The Court shall render a decision on an appeal, made in accordance with subsection (3 ), within seven days of the appeal being heard and may make any order the Court considers just in the circumstances. - 128 Verify source ↗
Powers of liquidator
The Bank gets liquidator powers in a compulsory winding-up or dissolution of a financial service provider, and must take steps to close out safe custody functions, notify affected persons, handle claims and unclaimed property, and return assets.
128. (1) In effecting a compulsory winding-up or dissolution of the financial service provider, in accordance with this Act the Bank may, in addition to any other powers, exercise the powers of the financial service provider concerned. Powers of liquidator (2) Without limiting the generality of subsection (1), the Bank as liquidator of a financial service provider shall have the power to— (a) bring, carry on or defend an action or legal proceedings in the name and on behalf of the financial service provider; and (b) carry on the business of the financial service provider only for the beneficial winding-up or dissolution of the financial service provider. 256 No. 7 of 2017] Banking and Financial Services Act No. of 2017 (3) Despite the Corporate Insolvency Act, 2017, and any other relevant written law, the Bank shall, after a decision to compulsorily windup or dissolve a financial service provider— (a) take all necessary steps to terminate safe custody functions performed by the financial service provider and shall return to each owner all assets and property held by the financial service provider as a bailee in relation to the owner; (b) cause to be made available at each branch for collection by each depositor, creditor, safecustodyservices customer and bailor of property held by the financial service provider, a customer’s statement of the nature and amount for which each one’s claim is shown in the financial service provider’s records, and shall cause to be published in a newspaper of general circulation in Zambia, a notice informing all such persons of the availability for collection of the customer statement at their respective branches. (4) Acustomer’s statement, made in accordance with subsection (3), shall state that— (a) a claim by the depositor or creditor shall be filed with the Bank within sixty days from the date of the customer’s statement being made available; and (b) safe-custody services customers and bailors shall be required to withdraw their property within sixty days from the date of the customer’s statement being made available. (5) Any property held in safecustody, on the premises of the bank or financial institution, that has not been withdrawn before the date specified in the customer’s statement shall be taken into possession by the Bank in the manner prescribed by the Bank. (6) Any unclaimed funds and property held by the bank or financial institution as a bailee, together with inventories that have not been withdrawn, in accordance with this section, shall be unclaimed funds for the purposes of this Act and shall be dealt with accordingly. - 129 Verify source ↗
130. Limitation of filing of claims
This section says the Bank is not liable, and nothing in this Part creates an obligation for the Bank to pay claims of depositors or creditors of a failed financial service provider.
129. Nothing in this Part shall be taken to impute liability on the Bank or place an obligation on the Bank to meet the claims of a depositor or creditor of a financial service provider that has been wound-up or dissolved. Immunity of Bank against depositor or creditor claims Banking and Financial Services [No. 7 of 2017 257 - 130 Verify source ↗
Limitation of filing of claims
The Bank must take several steps on claims and the liquidation schedule within six months after the last day in a customer’s statement.
130. The Bank shall, within six months after the last day specified in a customer’s statement, for the purpose of the filing of claims as provided in section 128 (4) (a)— Limitation on filing of claims (a) defer payment of any claim that is out of time; (b) determine the amount, if any, owing to each known depositor or creditor and the priority class of the claim in accordance with this Part; (c) file into Court, a liquidation schedule showing the steps that the Bank proposes to take; (d) reject any claim that appears to be of doubtful validity and notify, in the prescribed manner and form, each person whose claim has not been allowed in full; and (e) publish once a week for three consecutive weeks, in the Gazette, a newspaper of general circulation, or in other media in Zambia where the financial service provider had a branch, a notice of the date and place where the liquidation schedule is available for inspection, and the date, not earlier than thirty days after the date of the third publication of the notice, on which the Bank or person appointed shall file the liquidation schedule into Court. - 131 Verify source ↗
Objection to liquidation schedule
Certain interested parties may object to a liquidation schedule within 20 days, the Court must consider the objection, and the Bank may make partial distributions if a reserve is kept for disputed claims.
131. (1) Within twenty days after the filing of a liquidation schedule, as specified in section 130 (c), a depositor, creditor or owner of a financial service provider, and any other interested party, may file with the Court an objection to any step proposed. Objection to liquidation schedule (2) The Court shall consider an objection, filed in accordance with subsection (1), and may— (a) order that appropriate modification of the schedule be made; or (b) set aside the objection. (3) The Bank may, after the filing of the liquidation schedule, as specified in section 130 (c), make partial distribution to the holders of undisputed claims or claims that have been allowed by the Court, on condition that a proper reserve account is established for the payment of disputed claims.
Part
schedule
- 132 Verify source ↗
Priority of creditors
In a compulsory winding-up or dissolution of a financial service provider, certain claims must be paid first in the listed order, and the Bank must set up a depositor protection scheme.
132. (1) Despite the Corporate Insolvency Act, 2017, or any other written law, in any compulsory winding-up or dissolution of a financial service provider the following shall be paid in priority to all other debts in the order set: Priority of creditors Act No. of 2017 258 No. 7 of 2017] Banking and Financial Services (a) expenses incurred in the process of compulsory winding- up or dissolution; (b) depositors; (c) taxes and rates due; (d) wages and salaries of employees of the financial service provider for a period of three months; (e) charges and assessments due to the Bank; or (f) other claims against the financial service provider in such order of priority as the Court may determine on application by the Bank. (2) After payment of all claims submitted and accepted, the remaining claims with interest that are not submitted within the time allowed in accordance with this Part shall be paid, in the order of priority of their submission and at a rate to be fixed by the Bank. (3) If the amount available for payment for any class of claims, referred to in subsections (1) and (2), is insufficient to provide payment in full, the claims within a class shall abate in equal proportions and for the purposes of this section each paragraph of subsection (1) constitutes a separate class of claims and the claims referred to subsection (2) constitute another separate class of claims. (4) If the amount available for payment for any class of claims, referred to in subsection (1) is insufficient to provide payment in full, the claims shall abate in equal proportions. (5) The Bank shall establish a scheme for the protection of depositors. Undistributed funds - 133 Verify source ↗
Undistributed funds
After final distribution, the Bank must take any remaining undistributed funds into possession and hold them.
133. Any undistributed funds remaining after a final distribution, as provided for in this Part, shall be taken into possession and held by the Bank and subsequently dealt with in accordance with this Act. Final distribution in compulsory winding-up or dissolution Restriction of action by third parties Act No. of 2017 - 134 Verify source ↗
Final distribution in compulsory winding-up or dissolution
After all claims are paid in a compulsory winding-up or dissolution of a financial service provider, any remaining assets must be distributed among the shareholders.
134. Any assets remaining after all claims have been paid in a compulsory winding-up or dissolution of a financial service provider, shall be distributed among the shareholders. - 135 Verify source ↗
Restriction of action by third parties
A person must not start winding-up or dissolution proceedings for a financial service provider, unless the financial service provider starts the proceedings under this Part.
135. Despite the Corporate Insolvency Act, 2017, or any other written law to the contrary, a person shall not commence proceedings for the winding-up or dissolution of a financial service provider, except where the proceedings are commenced by a financial service provider in accordance with this Part. Banking and Financial Services [No. 7 of 2017 259 - 136 Verify source ↗
Power of Bank in relation to insolvent financial business
If a financial business becomes insolvent, the Corporate Insolvency Act, 2017 applies unless the Bank decides the winding-up or dissolution will proceed under this Part.
136. Despite this Part, where a financial business becomes insolvent, unless the Bank determines that the winding-up or dissolution shall be proceeded with in accordance with this Part, the Corporate Insolvency Act, 2017, shall apply. PART XI COMPLAINTS AND APPEALS PROCESS
Part
PART XI
- 137 Verify source ↗
Reasons for decisions and right to be heard
The Bank must notify an affected person of the reasons for its decision and invite written representations within the time stated in the notice.
137. (1) Where the Bank makes a decision in accordance with this Act, the Bank shall, by notice in writing— (a) inform the person affected by the decision of the reasons for the decision; and (b) invite the person so affected to make written representations, against the decision of the Bank, within a time stated in the notice. Power of Bank in relation to insolvent financial business Act No. of 2017 Reasons for decisions and right to be heard (2) The Bank may, on receipt of any representations made in accordance with subsection (1)(b), reaffirm, revoke or vary its decision and notify the person accordingly. Right appeal of (3) A decision of the Bank, made in accordance with subsection (1), shall remain in force unless reversed by the Bank or set aside by a tribunal on appeal or by the Court. - 138 Verify source ↗
Right of appeal
A person aggrieved by a decision of the Bank may notify the Bank and the Minister of an intention to appeal to the tribunal within seven days of receiving the decision.
138. A person aggrieved by a decision of the Bank may, within seven days of receipt of the decision, notify the Bank and the Minister, in the prescribed manner and form, of the person’s intention to appeal to the tribunal against the decision. Appointment and convening of tribunal - 139 Verify source ↗
Appointment and convening of tribunal
The Minister must constitute and convene a tribunal within 30 days after receiving a notice under section 138.
139. (1) The Minister shall, within thirty days after receipt of a notice made in accordance with section 138, constitute and convene a tribunal. (2) The tribunal shall consist of the following members appointed by the Minister— (a) a chairperson, who shall be a person qualified to be appointed as a Judge of the Court; and (b) two other members with knowledge and experience in law, banking and finance, commerce or accountancy. (3) The members of a tribunal shall be appointed on such terms and conditions as maybe specified in their letters of appointment. 260 No. 7 of 2017] Banking and Financial Services Powers of tribunal - 140 Verify source ↗
Powers of tribunal
A tribunal must decide appeals on the merits, may set its own procedure, is not bound by the rules of evidence, and must allow an appellant to appear personally or through a practitioner or agent.
140. (1) A tribunal shall determine an appeal on its merits, taking into account this Act and any other relevant written law. (2) A tribunal may determine its own procedure and shall not be bound by the rules of evidence. (3) A tribunal shall afford the appellant the right to appear personally or be represented by a practitioner or an agent. Decisions of tribunal - 141 Verify source ↗
Decisions of tribunal
A tribunal may confirm, vary, or quash the Bank’s decision on the matter before it.
141. (1) A tribunal may confirm, vary or quash the decision of the Bank on the matter before the tribunal. (2) A decision of a tribunal, except on a point of law, is final and binding on the parties to the appeal. (3) An appeal against a decision of a tribunal shall lie to the Court. Investigations PART XII GENERAL PROVISIONS
Part
PART XII
- 142 Verify source ↗
Investigations
The Bank may investigate suspected unlicensed or non-compliant banking or financial services by entering the premises and examining records, and people who refuse requested documents or information commit an offence.
142. (1) Where the Bank has reason to believe that a person is carrying on banking or financial business or providing financial services without a licence, contrary to the conditions of a licence or this Act, rules and regulations, the Bank shall, by its employees or agents, enter the premises on which the business is being conducted or services provided, to ascertain the facts of the matter and may access and examine the books, accounts and records of that person. (2) A person who refuses or fails to make available for examination any document or provide any information requested for purposes of or during an investigation, as provided in subsection (1), commits an offence, and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or imprisonment for a term not exceeding five years, or to both. Access to documents - 143 Verify source ↗
Access to documents
Any person may request to review or copy documents lodged with the Bank, but the Bank may set procedures, terms and fees, and may refuse access to all or part of a document in certain cases.
143. (1) Subject to this section, any person may, on request, review or copy any document lodged with the Bank in terms of this Act or any regulations or rules made in accordance with this Act. (2) The Bank may, by rules, specify procedures for making requests for access, as provided in subsection (1), and the terms and fees to be paid for purposes of such access. (3) The Bank may refuse to authorise a document to be reviewed or copied, in whole or part, where it determines that information in the document is— Banking and Financial Services [No. 7 of 2017 261 (a) confidential to the person lodging the document and has a real commercial value to the person that would be seriously and unreasonably prejudiced if the information were to be made generally available; or (b) personal information about a person and it is in the public interest that the information should not be generally available. - 144 Verify source ↗
Offences committed partly in and partly out of Zambia
An offence can still be treated as committed even if the relevant act, or some of the relevant acts, happened partly outside Zambia.
144. (1) Where this Act or any rules and regulations, made in accordance with this Act, provide that a person commits an offence where the person does a particular act, the offence is deemed to have been committed, even where the act is done partly outside Zambia. Offences committed partly in and partly out of Zambia (2) Where this Act or any regulations and rules, made in accordance with this Act, provide that a person commits an offence where the person does two or more particular acts, the offence is deemed to have been committed, even if some of those acts are done outside Zambia. - 145 Verify source ↗
Continuing acts or offences
If a required act is not done on time and the breach continues, or if a continuing non-compliance offence continues, the person commits a separate offence for each day it continues and may face daily administrative or conviction-based penalties.
145. Where in accordance with this Act — (a) an act is required to be done within a particular period or before a particular time and the obligation to do the act continues after the period has ended or the time has passed; or (b) failure or refusal to comply with the provision is an offence and such failure continues; the person commits a separate offence for each day on which the failure or refusal continues and is liable to an administrative penalty for each day on which the failure or refusal continues or, upon conviction, to a penalty prescribed by the Minister, by statutory instrument, for each day that the offence continues. - 146 Verify source ↗
Actions by Bank on conviction for offence
If a person is convicted of an offence under the Act, their licence or authorisation must be cancelled and they may be barred from banking or financial services; the Bank may later review or shorten the bar.
146. (1) A person who is convicted of an offence, in accordance with this Act, shall have that person’s licence or authorisation cancelled, as the case may be, and may not be licensed or authorised in terms of this Act, for a period determined by the Bank, and may be barred from participating, in any manner, in the provision of a banking or financial service on such terms and conditions as the Bank may determine. (2) The Bank may, on representation, review the bar as specified in subsection (1) and may, where an applicant shows good cause, reduce the period determined in accordance with subsection (1). Continuing acts or offences Actions by Bank on conviction for offence 262 No. 7 of 2017] Banking and Financial Services Use of word “bank” Restriction on use of name to indicate banking or financial business or financial service provider - 147 Verify source ↗
Use of word “bank”
A non-bank person must not use “bank” or similar terms in its name or business descriptions in Zambia unless the Bank gives written approval.
147. A person, other than a bank, shall not, without the written approval of the Bank, use the word “bank”, or any of its derivatives in any language, or any other word or symbol indicating the transaction of banking business, in its name or in any prospectus, advertisement or statement of any kind published or made to describe its business in Zambia. - 148 Verify source ↗
Restriction on use of name to indicate banking or financial
Businesses and other persons must not use names that suggest they are banking or financial service providers unless an exemption applies, and false claims about licences are prohibited.
148. (1) Subject to subsection (2), a person carrying on a business, unless the person is licenced as a financial service provider, shall not use any name which indicates or may reasonably be understood to indicate, whether in English or other language, that the business is being operated by a financial service provider or that it is carrying on banking or financial business. (2) A person shall not falsely represent to the public or any member of the public that the person— (a) holds a licence to conduct any banking business or provide financial services; or (b) is licensed to conduct any financial business of any kind. (3) Any person acting contrary to this section commits an offence and shall be liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both. (4) Subsection (1) shall not— (a) prohibit the use of that kind of name by a company or other entity incorporated or otherwise established outside Zambia and which has no permanent place of business in Zambia for the purposes of soliciting business or advertising its business in Zambia; (b) apply to— (i) a regional or international financial service provider whose membership consists partly or wholly of member States; or (ii) such other person as the Minister may, by statutory instrument, exempt. (5) An authority which, in accordance with any other written law, is responsible for the registration of companies or business names shall not register a company or a name of a business that would be in contravention of subsection (1). Banking and Financial Services [No. 7 of 2017 263 (6) Where a company or the name of a business is already registered in a style that is prohibited by subsection (1), the Bank shall notify the authority responsible for the registration of the company or business name to direct the person or company to alter or modify the name so as to comply with subsection (1). - 149 Verify source ↗
Validity of certain acts by financial service providers
A financial service provider’s transaction is not invalid just because it contravenes the Act, unless a court orders otherwise. The provider also does not need to pass a resolution to exercise a power under the Act, subject to its articles of association.
149. (1) A transaction entered into, in contravention of this Act, by a financial service provider, shall not be void or ineffective by reason only of the contravention, and shall not be voidable at the instance of the financial service provider, unless the Court orders otherwise. Validity of certain acts by financial service provider (2) Subject to a financial service provider’s articles of association, it shall not be necessary for a financial service provider to pass a resolution in order to exercise any power conferred by this Act. - 150 Verify source ↗
Power to summon officers, directors and shareholders
The Bank may summon certain officers, directors, or shareholders of a financial service provider for examination, and a summoned person commits an offence if they do not appear without reasonable excuse, withhold information, or give materially false information.
150. (1) Where the Bank considers that an officer, director or shareholder, past or present, of a financial service provider, has any information relating to the operations of the financial service provider which the Bank considers necessary for the performance of its supervisory functions, the Bank may, in the prescribed manner, summon that officer, director or shareholder, for an examination. (2) A person who, when summoned by the Bank, in accordance with subsection (1)— (a) fails without reasonable excuse to appear before the Bank for the examination; (b) withholds information; or (c) provides information which is false in any material particular; commits an offence and is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years or to both. - 151 Verify source ↗
Submission of information and documents to Bank
The Bank may require certain financial-sector persons to provide information, and a financial service provider must make sure required documents are properly signed.
151. (1) If in the exercise of any of its powers, performance of its functions or the discharge of its duties as provided in this Act, or in accordance with any other written law, the Bank requires any information from a financial service provider, any other person engaged in the provision of banking or financial services, a company affiliated, associated, holding or subsidiary company or any person that controls a financial service provider, on any matter relating to the affairs or business of the financial service provider, person or company, the financial service provider, person or company, shall submit the information to the Bank. Power to summon officers, directors and shareholders Submission of information and documents to Bank 264 No. 7 of 2017] Banking and Financial Services (2) A financial service provider required to furnish or supply a document to the Bank shall, in the case of a document prepared by the financial service provider, the form of which has not been prescribed by the Bank, ensure that the document is signed by the chief executive officer and the chief financial officer or a person authorised by the financial service provider. Alternative financial services - 152 Verify source ↗
Alternative financial services
The Bank may authorise a financial service provider to provide alternative financial services, and must prescribe rules for those services.
152. (1) The Bank may authorise a financial service provider to provide alternative financial services. (2) The Bank shall prescribe the rules for the provision of alternative financial services. Publication of information - 153 Verify source ↗
Publication of information
The Bank may publish information or data under this Act if it considers publication necessary or appropriate, but it must not disclose customer-affairs information obtained through its functions unless lawfully required.
153. (1) Where the Bank considers a publication to be necessary or appropriate, the Bank may publish, in whole or in part, any information or data furnished in accordance with this Act. Extension of time limits False document Immunity of officer, agent or employee of Bank Money circulation schemes (2) The Bank shall not reveal to a person information regarding the affairs of a customer of a financial service provider that was obtained in the performance of the Bank‘s functions, as provided in this Act, unless lawfully required to do so. - 154 Verify source ↗
Extension of time limits
The Bank may extend a deadline for a financial service provider to give a document or information, if requested by the provider or another interested person.
154. The Bank may, at the request of a financial service provider or other interested person, extend any period within which a financial service provider is obliged to furnish any document or information in accordance with this Act. - 155 Verify source ↗
False document
A person who issues or helps issue a false document referred to in this Act commits an offence and may be fined up to 200,000 penalty units, imprisoned for up to 2 years, or both.
155. A person who issues or takes part in the issuance of a document, referred to in this Act, which is false in any material particular, commits an offence and is be liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both. - 156 Verify source ↗
157. Money circulation schemes
Bank officers, agents, and employees are protected from legal actions or proceedings for good-faith acts or omissions done while carrying out powers, functions, or duties under the Act.
156. An action or other proceeding shall not lie or be instituted against an officer, agent or employee of the Bank in respect of any act done or omitted to be done by that officer, agent or employee in good faith in the exercise or performance, of any powers, functions or duties conferred by or in accordance with this Act. - 157 Verify source ↗
Money circulation schemes
A person must not conduct or participate in a money circulation scheme, or issue public invitations to subscribe to one.
157. (1) A person shall not— (a) conduct, or participate in, a money circulation scheme; or (b) issue a notice, circular, prospectus, proposal or other document inviting the public to subscribe to a money circulation scheme. (2) A person who contravenes subsection (1) commits an offence and shall be liable, upon conviction, to an administrative penalty as specified in this Part. Banking and Financial Services [No. 7 of 2017 265 - 158 Verify source ↗
Utilisation of collateral for settlement of certain obligations
The Bank must use collateral it holds for a clearing house or payment system to settle a member financial service provider’s obligations, under Bank-approved terms, and the collateral cannot be claimed against.
158. (1) Collateral that is held by the Bank on behalf of a clearing house or a payment system for the purpose of settling the obligations of a financial service provider, which is a member of the clearing house or payment system, shall be utilised for that purpose by the Bank in accordance with the terms and conditions approved by the Bank and shall not be subject to any claim. Utilisation of collateral for settlement of certain obligations (2) A certificate, issued by the Bank, certifying that the collateral or any part thereof has been utilised to meet the obligations of the clearing house or payment system shall be prima facie evidence of the matters stated in the certificate. (3) In the case of a financial service provider in respect of which the winding up, dissolution or liquidation has commenced in accordance with this Act, the balance of the collateral, after the collateral has been utilised in accordance with subsection (1), shall be dealt with in accordance with Part X. - 159 Verify source ↗
Special reserve or liability insurance
A financial service provider must keep a special reserve, insure itself, or make an acceptable commitment to the Bank.
159. A financial service provider shall — (a) maintain a special reserve account, with an amount that the board considers adequate, which shall be reserved exclusively for making good any loss resulting from the negligence or dishonesty of any director, chief executive officer, chief financial officer, manager or other employee of the financial service provider; (b) insure itself against loss, to an amount that the board considers adequate; or (c) undertake a commitment that the Bank may consider acceptable for the purpose of this section. - 160 Verify source ↗
Unclaimed funds and personal property
Certain long-unclaimed funds and personal property are treated as abandoned, must be reported and handed to the Bank by the financial service provider, and may be claimed back within six years.
160. (1) This section applies to— (a) a demand, savings or matured time deposit, together with interest or dividend thereon, excluding any charges that may lawfully be withheld, in respect of which the owner has not, within the last ten years— (i) increased or decreased the amount of the deposit, or presented identification documents with evidence of the deposit crediting the interest or dividends; (ii) corresponded in writing with the bank or financial institution; or Special reserve or liability insurance Unclaimed funds and personal property 266 No. 7 of 2017] Banking and Financial Services (iii) indicated an interest in the deposit as evidenced by a memorandum on file with the bank or financial institution; (b) funds paid toward the purchase of a share or other interest in a security issued by a financial service provider and any interest or dividends relating thereto, excluding any charges that may lawfully be withheld, in respect of which the owner has not, within the last ten years— (i) increased or decreased the amount of the funds or deposit; (ii) corresponded in writing with the bank or financial institution; or (iii) otherwise indicated an interest in the funds as evidenced by a memorandum in the records of the financial service provider; and (c) funds or other personal property, removed from a safe deposit box or any other safe-keeping facility on which the lease or rental period has expired due to the nonpayment of rental charges or by reason of some other default by the lessee, or surplus amounts arising from the sale of the property thereof in accordance with any other written law, that have been unclaimed by the owner for more than ten years from the date on which the lease or rental period expired. (2) Any of the funds or personal property, specified in subsection (1) (a) (b) or (c), shall be presumed to be abandoned on the expiration of the periods specified in that subsection, if the person that owns the funds or personal property fails to respond to a notice in writing, sent by the financial service provider by prepaid registered post, to the last known address of the person in the records of the financial service provider. (3) A financial service provider holding funds or personal property presumed abandoned under this section shall report to the Bank on the amount and nature of such funds or property, in such form and at such time as may be prescribed by the Bank, and shall pay such funds or relinquish the property to the Bank upon expiration of the time provided in this section for the presumption of abandonment to arise. (4) The financial service provider shall retain records and inventory of funds paid or property relinquished in accordance with subsection (3). Banking and Financial Services [No. 7 of 2017 267 (5) A person whose funds have been paid or whose property has been relinquished to the Bank, in accordance with this section, may claim the funds from the Bank within a period of six years from the date of receipt of the funds or the property by the Bank. (6) An action to recover, or other action in respect of, any funds or property presumed abandoned and paid in or relinquished in accordance with this section, may not be brought against the paying bank or against the Bank after the sixth year following payment or relinquishment to the Bank. (7) Where unclaimed funds or property are not claimed after the expiration of the period referred to in subsection (5), the funds shall vest in the State. - 161 Verify source ↗
Delegated supervision
The Bank may make rules to delegate its licensing or supervisory powers to an agent, subject to terms and conditions it determines.
161. The Bank may by rules, and on such terms and conditions as it may determine, delegate its licensing, or supervisory powers specified in this Act to an agent. - 162 Verify source ↗
Exemptions
The Bank may exempt a financial service provider from provisions of the Act and may set, vary, or revoke the exemption’s terms.
162. The Bank may, on such terms and conditions as it may prescribe, exempt any financial service provider from any of the provisions of this Act and may, in like manner, provide for the variation or revocation of any exemption granted. Delegated supervision Exemptions - 163 Verify source ↗
General penalty
If an Act offence has no specific penalty, the person convicted is liable to a fine up to 200,000 penalty units, imprisonment up to 2 years, or both.
163. A person that commits an offence in terms of this Act for which a penalty is not specificied is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both. General penalty - 164 Verify source ↗
Offence by body corporate or unincorporated body
If a body corporate or unincorporated body commits an offence, a suspected and charged director, manager, or shareholder may be liable on conviction to the penalty for that offence.
164. Where an offence under this Act is committed by a body corporate or unincorporated body, and the director, manager or shareholder of that body is suspected to have committed the offence and is charged of that offence, that director, manager or shareholder of the body corporate or unincorporated body is liable, upon conviction, to the penalty specified for the offence, unless the director or manager proves to the satisfaction of the court that the act constituting the offence was done without the knowledge, consent or connivance of the director or manager or that the director or manager took reasonable steps to prevent the commission of the offence. - 165 Verify source ↗
Administrative penalties
The Bank may compound an offence and impose an administrative penalty, and may recover an unpaid penalty through court action.
165. (1) Where the Bank is satisfied, after due investigation, or where a person admits that the person has committed an offence in terms of this Act or regulations or rules made in accordance with this Act, the Bank may compound the offence and impose such an administrative penalty, as may be prescribed. Offences by body corporate or unincoporated body Administrative penalties 268 No. 7 of 2017] Banking and Financial Services Industry reports Regulatory statements Rules (2) If a person, on whom an administrative penalty is imposed, in accordance with this section, fails to pay the penalty within the time ordered by the Bank, the Bank may, recover the penalty by action in a court of competent jurisdiction. - 166 Verify source ↗
Industry reports
The Bank must submit an annual industry report to the Minister within six months from 1 January each year, and the Minister must table that report before the National Assembly within 30 days after its next sitting following receipt.
166. (1) The Bank shall, within six months from the 1st day of January of each year, submit an industry report, to the Minister on the performance of the financial service providers for the twelve months ending on the preceding 31st December. (2) The Minister shall, not later than thirty days after the first sitting of the National Assembly next after receipt of the report referred to in subsection (1), lay the report before the National Assembly. - 167 Verify source ↗
Regulatory statements
The Bank may issue and publish regulatory statements, and may impose an administrative penalty on a financial service provider that contravenes one.
167. (1) The Bank may issue and publish regulatory statements. (2) The Bank may impose an administrative penalty on a financial service provider that contravenes a regulatory statement. - 168 Verify source ↗
Rules
The Bank may make rules by statutory instrument for matters needed to carry out the Act, including rules for financial service providers and customer money custody.
168. (1) The Bank may, by statutory instrument, make rules for or with respect to any matter that by this Act is required or permitted to be prescribed by the Bank, or that is necessary to be prescribed for purposes of carrying out or giving effect to this Act. (2) Without limiting the generality of subsection (1), rules made under subsection (1) may make provision for— (a) the conduct of business by financial service providers and their representatives; (b) matters incidental to the licensing of any financial service providers in accordance with this Act; (c) the class of persons in relation to whom, and the manner and circumstances inwhich, financial service providers may conduct or provide banking or financial services; (d) the correction of any errors in any register or record kept in accordance with this Act; (e) particulars to be recorded for the purposes of this Act, in relation to accounts of financial service providers; (f) the lodgement of auditor’s reports and the information to be contained in the auditor’s report; (g) the operating hours for financial service providers; (h) the lodgement by financial service providers of annual financial statements; Banking and Financial Services [No. 7 of 2017 269 (i) the exemption, on such terms and conditions as may be prescribed, of any financial service providers from any specified provision of this Act or any rule made in accordance with this Act, and the revocation of any such exemption or the modification of any such terms or conditions; (j) administrative penalties to be imposed; (k) the type of business that the Bank considers as constituting a banking or financial service; (l) maintenance of the confidentiality of customers of financial service providers; (m) information and the matters to be displayed on business stationery of financial service providers; (n) insurance by financial service providers against negligence or default; (o) the practice and conduct of share registers and other registers that are to be kept by financial service providers in accordance with this Act; (p) the resolution of disputes among financial service providers; (q) the making of annual or other regulatory returns to the Bank by financial service providers; (r) mandatory disclosures and registration of interests in financial service providers; (s) determination of fit and proper test for the purposes of this Act; (t) antimoney laundering and countering the financing of terrorism by financial service providers; and (u) any saving or transitional provisions the Bank considers necessary or convenient to be made in consequence of the enactment of this Act and the repealed Act. (3) The Bank may, by statutory instrument, make other rules to provide for— (a) the contents, form and issue of a prospectus, financial statements, annual reports and other documents required or provided for in this Act; (b) requirements for the display and use of unique numbers allocated for licences; 270 No. 7 of 2017] Banking and Financial Services (c) requirements for transactions, including requirements prohibiting or restricting a licensed company from commencing or carrying out business; (d) the formulation and publication of codes of conduct for financial service providers, officers and employees; (e) requirements for financial service providers to make reports to the Bank, either regularly or on the occurrence of specified events or circumstances; (f) requirements for contents, publicationand dissemination of reports to the Bank by— (i) financial service providers; and (ii) officers and former officers of financial service providers; (g) prudential rules, including rules as to capital adequacy, assets and other resources for financial service providers; (h) disclosures to be made by financial service providers; (i) keeping of books and records by financial service providers; (j) the transfer of business, contracts or other engagements of a financial service provider on insolvency or winding- up; (k) the taking of fees and the levying of charges; (l) the criteria for declaration as publicly traded companies; and (m) the effective administration and implementation of this Act. (4) The Bank may issue rules prescribing the segregation and safe custody of customer moneys or other property. Regulations - 169 Verify source ↗
Regulations
The Minister may make regulations for this Act, if recommended by the Bank.
169. (1) The Minister may, on the recommendation of the Bank, make regulations for carrying out or giving effect to the provisions of this Act. (2) Without limiting the generality of subsection (1), regulations made in accordance with subsection (1) may— (a) prescribe fees or charges payable in respect of any matter arising under, provided for, or authorised by, this Act; (b) prescribe offences and penalties not exceeding five hundred thousand penalty units or imprisonment for a period not exceeding five years, or both; Banking and Financial Services [No. 7 of 017 271 (c) prescribe the forms for applications, licences, approvals, registers, notices, orders and other documents required for the purposes of this Act; (d) prescribe the information to be given in returns and other documents delivered or made for the purposes of this Act; (e) provide the procedure for the service of notices, orders and documents as specified in this Act and the times at which they shall be considered to have been served; and (f) prescribe the procedure for objections, for purposes of this Act, and the making, consideration, hearing and determination of objections and appeals. - 170 Verify source ↗
Repeal of Cap. 387
This section repeals the Banking and Financial Services Act, 1994.
170. The Banking and Financial Services Act, 1994 is repealed. - 171 Verify source ↗
Savings and transitional provisions
This section keeps certain licences, applications, rights, liabilities, and existing orders in force after repeal, and gives the Minister power to make further transitional rules.
171. (1) Despite the repeal under section 170— (a) a financial service provider or a representative office that was, immediately before the commencement of this Act, licensed or deemed to be licensed in accordance with the repealedAct, shall be deemed to be the holder of a licence granted in accordance with this Act, and shall be subject to the same limitations and conditions attached to its licensing; (b) any application pending, in accordance with the repealed Act, shall be deemed to have been made in accordance with the corresponding provisions of this Act, and shall be dealt with in accordance with this Act; (c) any right or benefit accruing, or liability incurred, in accordance with the repealed Act, shall continue in accordance with and subject to this Act; and (d) any order, notice or direction made orgiven and in force, in accordance with the repealed Act, shall, unless inconsistent to this Act, continue in force until revoked in a manner specified in this Act. (2) The Minister may, by statutory instrument, make such other savings and transitional provisions as may be considered just or expedient for a smooth transition from the structures, requirements and forms provided for in the repealed Act. Repeal of Cap. 387 Savings and transitional provisions 272 No. 7 of 2017]
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Banking and Financial Services Act, 2017
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