Reserve Bank of Malawi (RBM) lawyers yesterday tussled with a witness for the defunct Finance Bank Malawi over the bank’s potential projected growth against the claimed K1 trillion compensation.
In cross-examining Mahtani Group of Companies of Zambia financial adviser Nkhuzo Kuwani, RBM lawyer Patrice Nkhono, senior counsel (SC), queried the witness on his comparison of Finance Bank’s potential growth with the growth in profits of National Bank of Malawi (NBM) plc.
The lawyer moved to discredit the assertion, saying the two were worlds apart and could not be compared.
The witness further submitted that Finance Bank failed because of unlawful regulatory pressure from RBM in 2004, which he said affected its business operations.
Minus the disruptions, he said the bank could have achieved an average annual growth rate of 6.5 percent over the past 21 years had it remained operational.
But Nkhono referred the witness to an RBM expert report of 2004 which, among other things, showed that the bank had higher credit risks and greater loan losses than NBM plc.
He also said Finance Bank had four branches against NBM’s 22 at the time, a scenario Nkhono argued demonstrated that NBM was a much bigger institution.
However, Kuwani disagreed, saying banks operate under the same parameters and are regulated by RBM.
On the claim that the bank experienced pressure in 2004 that affected its operations, Nkhono pressed Kuwani to state what kind of pressure he was referring to.
In response, Kuwani said his understanding of the Malawi Supreme Court of Appeal order this year, meant there was pressure.
However, Nkhono drew the court’s attention to the fact that the court order did not state that, adding that, according to RBM reports, Finance Bank’s profits started declining in 2002, before the alleged pressure.
“The court will decide that [if there was pressure], otherwise your answer is unsatisfactory,” said Nkhono.
The lawyer also said Kuwani had not presented in court the bank’s credit loss provisions for the past 21 years.
Kuwani is the bank’s second witness after its liquidator, Sokwani Chilembo, who testified on Monday.
Apart from Nkhono, the State’s legal team also comprises Attorney General Frank Mbeta, Zumbe Kumwenda and James Masumbu, SC.
On the other hand, the bank’s legal team has Modecai Msisha, SC, Wapona Kita and Patrick Mpaka.
In February this year, the Supreme Court faulted the financial services regulator’s decision to revoke Finance Bank’s licence over alleged malpractices, including claims that the bank opened ghost accounts used to externalise foreign currency. The ruling ended a 21-year legal battle dating back to May 2005.
The Supreme Court also granted Finance Bank’s request for compensation for loss of business.
Records show that Finance Bank made a profit after tax of K70 million in 2001. The figure rose to K159 million in 2002 before declining to K121 million in 2005.
