Banks ready for Basel III rollout

The Reserve Bank of Malawi (RBM) says the country’s eight commercial banks are ready for the rollout of Basel III, it says will further strengthen banking system resilience and improve market confidence.

The rollout of Basel III—internationally agreed set of measures to strengthen the regulation, supervision and risk management of banks from January 2024—will come 10 years after the rollout of Basel II in January 2014.

The rollout resulted in some banks being taken over by others due to failure to meet the $5 million (about K5.1 billion) capital requirement.

In a written response yesterday, RBM spokesperson Davie Ndege said the central bank is confident that the country’s banks are moving towards smooth implementation of the third Basel accords.

He said the preparedness of the banks show that they have done what is required for the central bank to implement Basel III.

Said Ndege: “After implementing Basel II in 2014, a decision was made to migrate to Basel III starting that journey in 2020.

“The process was slowed a bit due to the Covid-19 pandemic as it required meeting both internally and externally.”

He said the project started with a survey to determine banks’ readiness to migrate to Basel III and results of the survey were satisfactory.

He said the central bank may not make capital calls directly as a result of migrating to Basel III, adding that based on specifics and self-assessment, banks may need to invest in data and systems.

“We do not anticipate the migration to be a big challenge for banks having already experienced migration from Basel I to Basel II,” said Ndege.

In a written response, Bankers Association of Malawi chief executive officer Lyness Nkungula said the banking industry is prepared for the transition.

She said: “Fortunately Malawi took an early approach in 2014. While the country implemented Basel II, it took on some facets of Basel III.

“In this regard, RBM has been monitoring the liquidity coverage ratio and net stable funding ratio since 2014. Malawian banks are well capitalised and they should be able to meet these new capital buffer requirements.”

RBM adopted the current Basel II standards for risk and capital management to develop a framework that strengthened the soundness and stability of the banking system in 2014.

Through the implementation of Basel II, the capital adequacy requirement for the country’s banks was also increased to $5 million, a development which saw some banks failing to meet the same.

Following the rollout of Basel II, Indebank, Malawi Savings Bank, Opportunity Bank, New Finance Bank and Nedbank were merged or taken over by some other banks.