WINDHOEK – The Bank of Namibia (BoN) yesterday announced proposed amendments to the Banking Institutions Act and its commencement of drafting credit bureau regulations. If approved by Cabinet these proposed amendments will, amongst others, streamline the banking industry, open the market for smaller banks and introduce limits to foreign shareholding in banking institutions, while the credit bureau regulations will ensure that regulators are better equipped to assess the indebtedness of all households in the country.
The proposed Bill would streamline the definition of banking business in order to provide more clarity and to ensure its proper application; introduce requirements for banking institutions to have recovery plans or “living wills” that will detail how to resolve a financial problem to enhance and improve the resolution provisions of the banking law when dealing with weak or distressed banking institutions; introduce a differentiated regulatory framework for micro-finance banking institutions; refine the provisions relating to illegal financial schemes, or pyramid schemes so as to enhance the understanding of the public to detect illegal schemes, and introduce limits on foreign shareholding in banking institutions.
“As you may be aware, significant changes have taken place in the local and international arena since the financial crisis, which warrant the review of the current legal framework and regulatory provisions. Therefore, it is important for Namibia, like other countries, to introduce mechanisms and regulatory changes to diligently safeguard the soundness of its national banking system,” said the Assistant Governor, Michael Mukete, on revising the banking sector legislation
The proposal entails that the Banking Institutions Act of 1998, as amended will be repealed to ensure that there is a single legislation governing matters relating to banking institutions and their controlling companies.
On the amendments to the draft credit bureau regulations, Mukete remarked that while existing credit bureaus operating in the country, such as Compuscan, Trans Union and the Namibia Credit Bureau, are legal entities, these entities need to be governed by national legislation. “What is missing in our legal system at the moment is a specific law regulating how these entities should manage the information under their care, and there is no centralized credit information system that allows banks and other lenders to know the total exposure per client and their credit history so as to avoid overextending of consumers,” said Mukete.
Currently credit providers are under no obligation to supply information to credit bureaus. The proposed regulations seek to establish rights and obligations of credit bureaus to be registered and licensed by the Bank of Namibia, and all credit bureaus are to have a centralized system. Such a system should have the capability of calculating total credit exposure per client and requires that all credit providers are to supply information to all credit bureaus. The regulations also provide clear guidelines pertaining to the kind of data to be collected, retention period and confidential client information that can be shared with other businesses. These would bring Namibia in line with international best practices in financial risk management by allowing for transparent credit history information to be available for decision making and facilitating cheaper access to funding.
“At the same time, it contributes to financial discipline at an individual level because those who are not disciplined to pay back borrowed money will have difficulties getting credit and if they get it, they will pay a high price,” noted Mukete.
Credit bureau regulations are also expected to enable regulators to be in a position to determine whether or not the financial stability of the country is under threat and whether or not necessary action needs to be undertaken to contain the situation.
By Edgar Brandt