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12 Apr 2023

 The Ministry of Finance is set to promote safety and soundness of banks in the country.

That will follow approval of the proposed holistic review of the Banking Act to enable licensing, regulation and supervision of banks and deposit-taking institutions.

Presenting the Banking Bill of 2023 for second reading in Parliament on Tuesday, finance minister, Ms Peggy Serame said unlike the previous two amendments that were made to address urgent matters, the current proposals were holistic and comprehensive, addressing several strategic objectives and seeking to align the country’s regulatory and supervisory standards to the changing nature of both domestic and international financial systems.

“Following the 2007 Financial Sector Assessment Programme (FSAP) supported by International Monetary Fund and the World Bank, there was a need to address the identified shortcomings, hence the proposed amendments,” Ms Serame said.

Some of the shortcomings she said, included evolving domestic and international financial systems, which presented new and more complex regulatory challenges as well as the emergence of financial conglomerates and cross-border establishments.

She added that the FSAP also highlighted that Botswana did not have a framework for managing systemic banking crises as well as bank recovery and resolution.

“The Bill therefore seeks to address the deficiencies in Bank of Botswana’s resolution powers and to provide a comprehensive legal framework for corrective action,” she said.

She highlighted that the review of the Act would also incorporate several recommendations of the Financial Sector Development Strategy for Botswana on legislative and regulatory reforms necessary for strengthening institutional arrangements and policies for a sound, competitive, inclusive and growing financial sector.

Also, she said the legal frameworks the proposed Bill would seek to strengthen included provision of a sound legal footing for the development of an inclusive, innovative and growing banking sector.

“It will also grant the Central Bank powers to intervene early with respect to banks in distress and use a full range of remedial powers without first requiring that an on-site examination be conducted. It will also enable the Central Bank to implement a risk-based supervision framework more fully,” she said.

Further, the minister said the new proposals would further outline a clearer path on how appeals against the licensing decisions for the banks by the Central Bank would be considered.

Again, she said the proposed amendments would seek to provide a restriction on the use of the word ‘bank’ to only institutions that had been licensed by the Central Bank.

“Through the proposals, we also seek to give the Central Bank operational autonomy consistent with international standards. This will allow it to accommodate and support innovation in the banking system, by licensing a variety of banks, including internet banking and deposit-taking institutions,” she added.

Also, she said the Central Bank would be given liberty to reject a license application where the applicant did not comply with the requirements of the Act as well as provide for appeal of decisions of such denial to the Appeals Tribunal.

She said any bank or deposit-taking institute would be required to seek approval from the Central Bank before declaring, paying or transferring abroad any dividend from their profits while banks would henceforth be prohibited from engaging in any business or activity for which they were not licensed.

“Through amending some clauses in the Act, we will thereby also amend banking secrecy to ensure that Botswana complies with a number of international protocols relating to anti-money laundering or counter financing terrorism and transparency on exchange of tax information, among others,” she said.

The minister also told Parliament that amending the Banking Act would also align it with the international best practice as it would ensure that it protected the Central Bank and its staff from possible litigation when performing public interest functions. ENDS