Wednesday, November 29, 2023

Some banks breaking the law – BoB

On-site examinations carried out by the Bank of Botswana officials have revealed that some banks are either not in compliance with the law, following guidelines or adhering to corporate governance principles.

Typically, the report does not name names and quotes figures in the precise manner the audit-and-tell report of the Auditor General does with its subjects.

In its 2011 Banking Supervision Annual Report, BoB says that while compliance with CAMELS (a banking supervision method that reviews Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk) was on the whole satisfactory, bank managers seemed reluctant to implement board decisions promptly.

“There was also non-compliance with the Guideline on the Appointment of New Directors and Senior Management Officials of Banks, given that executive directors were more than non-executive directors,” the report says.

Examinations intended to establish compliance with a regulatory guideline on Disclosure Framework for Deposit and Lending Interest Rates revealed that one bank had explored the possibility of increasing the minimum threshold. Additionally, three banks did not comply with the minimum public disclosure and statutory requirement prescribed by this guideline.

In carrying out on-site examinations at two banks, BoB officials discovered violations of the Banking Act, non-compliance with both corporate governance and liquidity contingency planning issues.

The governance framework at one bank revealed inadequate review of the credit policy in line with the changing nature of the bank’s product offerings; absence of formal arrangements to undertake a formal and rigorous evaluation of the board’s performance on a regular basis; and, the need to take action against some board members who were not attending meetings on a regular basis.

At another bank, the officials found that the corporate governance framework, practices and procedures required improvement. The report says with regard to the latter: “These included the need for security and financial probity of senior management and board members as an additional fit and proper test; board approval of the management succession plan into a formal policy document; need for the development and implementation of the board evaluation tools; and the need to develop a liquidity contingency funding plan that should include a clear description of a diversified set of viable funding options readily available in various adverse conditions.”

During the year under review, BoB had to revoke licences of five bureaux de change because they had violated its regulations. In all, the bank’s officials carried out on-site examinations of seven bureaux and while the findings were generally satisfactory, contravention of some regulations were noted.

These related to anti-money laundering, receipts of transactions, timely submission of accurate statutory returns and auditing of books. For their part, bureaux operators complained about parallel marketing which had forced some operators out of business as well as acceptance of foreign currency by local business for payment of goods and services.

“The former remains a challenge for law enforcement agencies, whilst the latter will be addressed through the ongoing review of legislation,” the report says.

One bank was also found to not have adhered to BoB’s regulations on anti-money laundering as it opened customer accounts without the requisite Know-Your-Customer documentation.

Conversely, another bank was found to have shown commitment to combating money laundering and the financing of terrorism through its continuous recognition and reporting of suspicious transactions to the Directorate on Corruption and Economic Crime and BoB itself.

On the downside, BoB inspectors found that a majority of this bank’s trust accounts had no traceable records confirming the lawful source of funds, which should be either in the form of a letter of undertaking from donors or copies of audited financial statements. The bank was advised to make provision of sufficient information about account holders a prerequisite to opening an account as well as to obtain the missing information as a matter of priority.

BoB also had to deal with customer complaints regarding unauthorised ATM transactions, account closure without valid reasons and disagreements regarding settlement of loan facilities by customers.


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