ABSTRACT
In the year 1996, the banking and financial services industry has made significant strides to recoup the lost confidence that resulted from the closure of three indigenous banks in 1995 (Meridien BIAO Bank (Z) Ltd, African Commercial Bank (Z) Ltd and Commerce Bank (Z) Ltd). The turbulence experienced in that year has been attributed to the weak financial structure that banks and financial institutions have been operating under. The challenge of the (Bank of Zambia) Financial System Supervision Department has been to strengthen this structure and to implement a more effective and efficient supervisory environment. This has been achieved through constant close supervision and implementation of various regulations during 1996. The most significant of the regulations was the Capital Adequacy Regulation. The Capital Adequacy Regulation prescribes that commercial banks and all other deposit-taking institutions have a minimum regulatory capital of K2 billion; and non-deposit-taking financial institutions a minimum of up to K250 million. As regards non-bank financial institutions (NBFI), effective regulation and supervision has so far been impeded because the Banking and Financial Services Act (BFSA) was drafted primarily to regulate the activities of commercial banks. In spite of the absence of a specific regulatory framework, I am pleased to note that the growth in the number of NBFI is extremely encouraging and is contributing to the much needed diversity of financial services available in the financial sector. The Department through a study funded by the United Nations Conference on Trade and Development (UNCTAD) is working to create and strengthen the prudential regulation of these institutions. It is hoped that once this is in place it will greatly enhance the supervisory role in this sector. The Bank of Zambia (BOZ) is looking towards 1997 as yet another challenging year for the Department as it strives to strengthen its staff base and improve supervisory capacity. The possibility of creating a deposit insurance scheme to protect depositors’ funds and boost customer confidence will be another major task for the department in the year ahead. I am confident that we will continue to develop the necessary legal framework, competent supervisory skill and expertise to ably meet the challenges ahead of us [Dr Jacob M Mwanza, Governor of the Bank of Zambia, Financial System Supervision Annual Report (1996)].
