Sunday, January 24, 2021

Government tightens banking regulatory system

Government is planning to tighten the regulatory system of the banking sector in the wake of the global financial credit crisis that hit the developed countries, triggered by the sub-prime lending the United States of America’s market.

Assistant Minister in the Ministry of Finance and Development Planning, Samson Guma, unveiled the plan at the Botswana Institute of Bankers Dinner held at the Gaborone International Conference Centre on Friday.

“The financial crises that hit the United States of America and other parts of the world in September this year cannot be overlooked. The impact of the financial crises in the US and Europe has adversely affected a wide range of economic activities,” Guma said.

Although Botswana financial institution emerged out of the crises unscathed because of their distant connection with the international financial system, Guma warned that there are some lessons which Botswana should learn from the debacle.

He said the high household debt in the country is worrying and needs the banking system to tighten its lending rules in the country. Bank of Botswana is reputed to be very stringent on the commercial banks’ financial adequacy and enforcing the rule of tighter lending to banks’ customers.

“However, there are some lessons for financial institutions in Botswana, relating to the maintenance of prudent lending policies, in particular given concerns about high-levels of indebtedness by household sector,” he said.

Over 50 percent of the commercial banks’ debt is driven by the risky household sector that is prone to a tank when the interest rates jump higher and it does not have the nerve to drive up the economy.

Guma commended the financial institutions in the country saying that although the household debt is generally considered to be high, banks have heavily invested in government’s short term financial paper ÔÇô the Bank of Botswana certificates ÔÇô currently valued around P 18 billion.

“Government recognizes the good role that Bank of Botswana is playing in exercising its mandate of regulating the banks and other financial institutions under both Bank of Botswana Act and Banking Act. According to the 2007 Bank of Botswana annual report, the banks were generally compliant with prudential requirements.
“It is pleasing that banks continued to be adequately capitalized, and liquid, served their concentration limits, maintain appropriate provisions for past due loans and held high quality assets in their books,” he said.

“Government and Bank of Botswana will continue to improve the regulatory environment for all financial institutions in line with the best international practice,” Guma added.

Some of the new changes that are to be introduced alongside with strong regulatory procedures include the tightening of the financial intelligence which is aimed at forestalling possible financial crimes and money laundering. The bill to that effect will be brought to parliament in the not distant future.

“Government is drafting the financial intelligence bill, which will establish the financial intelligence agency. The agency will be responsible for receiving, analyzing and disseminating suspicious financial transactions,” he said, adding that the new agency will be taking some of the responsibilities from DECEC.

As part of the scheme, bankers are expected to be fully informed about issues of money laundering in a bid to protect the industryÔÇöincluding the issues related to counterfeit money and electronic fraud.

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