Four Malawian banks fail to meet Basel II capital

Four of the Malawi’s 11 commercial banks were by June 30 yet to meet the new capital requirement of $5 million (about K2 billion) under Basel II, the Reserve Bank of Malawi (RBM) has said, clearly signalling their capital inadequacy.

The second of Basel Accords issued by the Basel Committee on Bank Regulations, rolled out on January 1 this year, to promote the adequate capitalisation of all banks and encourage improvements in risk management and strengthening the stability of the banking system.

 Reserve Bank of Malawi
Reserve Bank of Malawi

In its Financial Stability Report (FSR) dated June 2014, RBM said after implementing Basel II during the first quarter [January to March] 2014, it was observed that four banks are yet to meet new capital requirements and were expected to have met the requirement by June 30 2014.

“The process of recapitalisation of these banks is already underway. Furthermore, it was noted that all banks except for three are yet to acquire management information systems which are appropriate for Basel II reporting. The registrar is in constant contact with the banks to ensure successful transition to Basel II,” reads part of the report.

RBM spokesperson Mbane Ngwira could not be reached to name the four banks that are struggling to meet new capital requirements under Basel II.

But prior to the rollout date, a number of banks indicated it they had increased their capital to be in line with the new banking regulations requirements.

For instance, FDH Bank shareholders injected $4.8 million (about K1.8 billion) into the bank, Ecobank Malawi pumped in $5 million (about K2 billion), FMB made available $10 million (about K4 billion), Standard Bank allocated an additional K930 million from retained earnings to share capital through bonus issue to increase capital to K2 billion and NBS Bank chose the option of moderating dividend payment to retain more equity.

Some banks, notably National Bank of Malawi, however, indicated there will be no need to increase their capital base because they are already adequately capitalised. However,Nedbank, government-owned Malawi Savings Bank (MSB), Opportunity Bank of Malawi, Indebank and CDH Investment Bank have not indicated, at least, publicly, if they have increased their capital to meet the new requirement.


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