13 Apr 2023

A holistic review of the Banking Act after a long time from the last one will ensure that the Act remains relevant for a longer time before a need for another assessment, Minister of Finance, Ms Peggy Serame has said.

Minister Serame said this when responding to contributions from Members of Parliament on the proposed Banking Bill of 2023 on Wednesday.

She indicated that such a holistic approach would enable simultaneous amendment of a number of sections.

“This will also help to bring the Act up to date on current global banking trends. 

As legislators, I am aware that there may have been a few sections that you might have wished we could have amended, but we had to look beyond individual interests,” she said.

On the issue of citizen-owned banks, Ms Serame said foreign nationals would not be shut out from participation. 

Some legislators had cautioned against too much nationalism.

She also told legislators that modern banking system services could be accessed without necessarily building a physical structure, citing the use of banking agencies.

“We have to take into account that banks are businesses, so they always do a market assessment to determine business viability before setting up. 

What we need are services and not a physical structure,” she said.

She also conceded that there was need to educate Batswana on financial literacy as many had been found wanting.

“We have noted that financial illiteracy existed even among the educated lot that one assumed would know better. 

So there is a need to intensify financial literacy among citizens,” she said.

Ms Serame also assured them that even though banking charges in Botswana were relatively low compared to the rest of the region, there was no harm in reviewing them with a possibility of reducing them further. 

 “It is something we could always consider in the future,” she said.

Earlier, some MPs had called for establishment of banks in rural areas, which they argued would help educate Batswana on issues of financial literacy.

Meanwhile, once the Act is amended and approved, it is expected to promote safety and soundness of banks in the country and also enable licensing, regulation and supervision of banks and deposit-taking institutions. 

Unlike the previous two amendments that were made to address urgent matters, the minister had indicated that the current proposals were holistic and comprehensive, addressing several strategic objectives and sought to align the country’s regulatory and supervisory standards to the changing nature of both domestic and international financial systems.

She had told MPs that 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 to the Banking Act.  

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.

It was also highlighted that Botswana did not have a framework for managing systemic banking crises and bank recovery and resolution, therefore amending the Banking Act would address the deficiencies in Bank of Botswana’s resolution powers and further provide a comprehensive legal framework for corrective action. 

The review of the Act will 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. ENDS