Malawi a model for Basel II—RBM

Malawi is fast becoming a ‘super model’ in the region and the continent in issues of Basel II, the second of Basel accords to be effective January 2014, the Reserve Bank of Malawi (RBM) said on Monday.

Despite that Basel II implementation is not an easy process, according to the RBM’s director of bank supervision Eldin Mlelemba, several countries in Africa and the world over are behind Malawi.

“This is evidenced by the increasing number of countries that have shown interest to learn from us. You may wish to know that we recently shared notes with our colleagues from the National Bank of Rwanda and we still continue to have more requests,” said Mlelemba in Blantyre at the opening of capital management, risk appetite and contingency planning workshop.

The week-long meeting being facilitated by Rob Wade, Sarel Venter and Bianca Ruddy of KPMG South Africa and Rob Smith from KPMG UK, has pooled officials from the country’s 12 banks and Airtel Malawi.

The RBM official expects that after the roll-out in January 2014, Malawi will be able to offer some consultancy services to others.

Basel II are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision, and the local banks are expected to be compliant come January 2014.

One of the principal objectives of implementing Basel II is to have banks that are adequately capitalised all the time, but they will need to manage their capital if they are to maintain satisfactory capital adequacy levels.

Mlelemba said, currently, capital must be a key part of the decision-making framework for every bank.

“Every decision which changes the risk levels of a bank must be considered through the capital lens. Basel II has brought in an evolution of capital management practices amongst banks,” he said.

Mlelemba, formerly RBM’s director of finance and capital markets, noted that effective capital management has to do with the bank’s ability to identify, measure and control major risks that affect bank’s capital.

With only eight months to the roll-out date, the RBM is confident that the banks can now ‘comfortably’ conduct a parallel run of Basel II.

But the challenge though is the lack of appropriate management information systems (MISs) in some of the banks.

But Mlelemba assured that some banks have made good progress in enhancing their existing MISs or the acquisition of new MISs which are appropriate for Basel II requirements.

KPMG’s Wade thanked the RBM for being forthright to ensure that banks get suitable training and exposure.

He asked the bank officials to ensure that their risk management philosophy goes down to the clerical levels.

“Risk management is not the sole responsibility of a manager or a CEO [chief executive officer], but all the staff. Risk management is an evolutionary process,” he said.

The RBM has, since last year, conducted a number of trainings for banks’ officials as the country counts down to the implementation of Basel II.