RBM to monitor banks on basel II

The Reserve Bank of Malawi (RBM) will monitor some banks that had challenges on meeting capital requirements under Basel II, an international standard for banking regulators that guard against financial and operational risks, which rolled out on January 1 2014.

RBM spokesperson Mbane Ngwira, in a questionnaire response on Saturday, said banks in Malawi were well prepared for the rollout.

“Some banks had challenges in meeting the requirements of Basel II implementation. However, all banks were engaged on individual basis to ascertain that the new capital ratios and all other requirements are met. For those that could not immediately meet the requirements, plans were drawn for the respective banks to address the shortfalls.

“[Under Basel II], the general public will notice huge public disclosures by banks which will assist the public to assess the bank’s risk management practices and financials in detail,” he said.

Ngwira said RBM issued Basel II guidelines for use by banks as minimum risk management requirements and also organised training workshops targeting different groups of bank officers.

He said the second of the Basel accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision, is key in enhancing bank risk management practices and, in the long run, banks will have sound risk management practices which will entail a sound banking system.

The Institute of Bankers (IOB) in Malawi, on its website said that it believes that the Basel II implementation will result in important public policy benefits that can be obtained by improving the capital adequacy framework alongside important dimensions—capital regulation that encompasses not only minimum capital requirements but also supervisory review and market discipline.

To meet Basel II capital requirements, banks in Malawi were expected to boost their capital base so that their Tier One Capital Ratio—the ratio of a bank’s core equity capital to its total risks weighted assets (RWA)—are at 15 percent.

Recently the country’s two banks, FDH Bank and Ecobank increased their capital in readiness for Basel II.

Some banks already had high levels of capital; hence, their need to recapitalise was lower than those that had lower levels.