Unsafe and unsound banking practices in Zambia: The case of access finance services and Acess leasing Limited
Makala, Mubitha Likando
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The purpose of this dissertation is to provide a full analysis of the Central Bank's role in supervision and regulation of activities of financial institutions, in particular, how the Central Bank handles cases where a financial institution engages in unsafe and unsound banking practices. It further attempts to address the need to have a statutory definition of what amounts to unsafe and unsound banking practices. In approaching the concept the research starts by explaining the role of the Central Bank in regulating and supervising financial institution in Zambia. It ftirther examines the extent of the Central Bank's power in its regulatory and supervisory function, in particular, how it handles the issue of unsafe and unsound banking practices. In addition it considers the treatment of unsafe and unsound banking practices in other jurisdictions.The outcome of the research indicated that in most instances when a financial institution is alleged to have conducted in unsafe and unsound banking practices, the Central Bank takes supervisory action against it, without proper determination of whether indeed the conduct falls within the ambit of unsafe and unsound banking practices. The conclusion arrived at, is that the Central Bank has too much discretion in its exercise of its supervisory fiinction. When dealing with the issue of unsafe and unsound banking practices as there is no criteria of determining which activities amount to unsafe and unsound banking practices, hence the criteria used is what it thinks fit in each situation. This has led to a number of problems including; bank closures, loss of confidence in the Central Bank as regulator and financial institutions, which ultimately leads to less investment opportunities in the country. The study therefore, recommends that there should be a statutory definition of what amounts to unsafe and unsound banking practices in Zambia. This can be done by parliament as a long term recommendation, ensuring that this gap in the law is filled. Therefore, the BFSA should be amended so that it includes a definition or an interpretation of the term 'unsafe and unsound banking practices'. It also recommends as short term, that BOZ should give a policy interpretation of the meaning of 'unsafe and unsound practice', given the absence of a statutory definition. BOZ can also emulate how the concept of unsafe and unsound banking practices is dealt with in other jurisdictions. For instance, the United States of America has proved to better deal with the concept of unsafe and unsound banking practices.
- Law