Banking Amendment Bill - H.B. 6A, 2015

This is the Banking Amendment Bill as passed by Parliament. It amends the Banking Act, the Reserve Bank of Zimbabwe Act, the Deposit Protection Corporation Act and the Schedule to the Reserve Bank of Zimbabwe Amendment Act 2010, and repeals the Troubled Financial Institutions (Resolution) Act outright.

The biggest structural change is around ownership and control. A new Part limits shareholding in banking institutions and controlling companies, regulates the acquisition of a significant interest, addresses nominee shareholding, sets out the effect of shareholding held in contravention of the Part, and gives power to require divestment of shares to prevent undue influence by a shareholder. The right to control a banking institution is restricted, and controlling companies must be registered on a public register that can be amended or cancelled. A principal shareholder is defined as anyone owning or controlling more than five per cent of shares or voting stock.

Corporate governance is tightened alongside it. The Bill defines an independent director in detail — no significant shareholding, not an officer or employee for the preceding three years, not a director for the two years before appointment, not connected to any company in the same group, not a professional adviser, and not a nominee, associate or close relative of any of those. New sections require corporate governance arrangements, a compliance function with a named compliance officer, and a risk committee, and directors of banks and controlling companies must disclose their interests.

A new Part gives bank customers rights they did not have. Banking institutions must publish certain information, disclose certain information to customers, and operate customer complaints procedures — and civil penalties attach to non-compliance with that Part.

On credit, the Bill builds the legal framework for a credit registry: it defines credit information, credit ratings, credit rating agencies, credit reference bureaux and credit reference services, and requires credit reference bureaux to be licensed.

On failing banks, a new set of sections deals with problem banking institutions — defined as institutions whose capital adequacy, asset quality, liquidity or solvency is or will be significantly impaired without major improvement — providing for a problem bank notice, its confirmation, and the implementation of a bank resolution plan. This regime replaces the repealed Troubled Financial Institutions (Resolution) Act. Amendments to the Reserve Bank Act add immunity, investigation and curatorship powers for special asset management companies, and exempt them from certain duties and fees.

Two other changes are worth flagging. Special purpose vehicles are defined and regulated, with the definition expressly naming tax avoidance and off-balance-sheet structuring among the purposes such vehicles are created for, and establishing one without Reserve Bank approval becomes a ground for regulatory action. And "mobile banking" is defined to cover access to financial services through a mobile device whether the arrangement is run by a bank, a telecommunications licensee, or an independent operator — bringing mobile money arrangements squarely within the Act's reach.

Failure to pay a deposit on demand, or a term deposit on its due date, is added to the grounds on which the Registrar may act against an institution.