Namibia moves to strengthen financial sector and protect customers

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Namibian Minister of Finance Ipumbu Shiimi on Tuesday tabled the Banking Institutions Bill which aims to create a more effective and responsive banking regulatory framework aligned with national aspirations and international supervisory standards.

Speaking to Lawmakers, Shiimi said one of the key objectives of the bill is to regulate banking fees charged to clients, following numerous complaints about excessive charges levied by commercial banks in the country.

Under the new bill, the minister of finance will be granted the authority to oversee and regulate banking fees, ensuring fair practices and protecting customers from overcharging.

Highlighting the issue of foreign ownership and governance interference, Shiimi emphasized the importance of local empowerment and promoting Namibia’s socioeconomic development.

Presently, the majority of the eight banking institutions in the country have foreign majority shareholders.

“To address concerns regarding foreign parent companies’ interference in the governance and management of local banking institutions in Namibia, the proposed measure suggests strengthening the powers of the board of directors of banking institutions. This enhancement aims to safeguard institutional independence and promote national economic development by ensuring that commercial decisions are made in the interest of the nation rather than favoring foreign interests,” he said.

Shiimi also acknowledged the limitations faced by the central bank in addressing violations of banking regulations or activities detrimental to customers.

Consequently, the proposed bill aims to bridge these gaps by enhancing the bank’s powers, he said, adding that this includes granting the bank the authority to suspend or remove directors or executive officers of banking institutions when there are suspicions of illegal activities that harm the banks.

The need for the Banking Institutions Bill became evident through assessments conducted by international bodies.

The World Bank’s 2018 Financial System Stability Assessment identified significant weaknesses in existing banking legislation, particularly the lack of adequate stabilization powers for the Bank of Namibia, the central bank, to handle failing banks.

Additionally, the Mutual Evaluation conducted by the Financial Action Task Force/the Eastern and Southern Africa Anti-Money Laundering Group in 2021 highlighted the absence of a clear definition of beneficial owners, which posed a risk of Namibia being grey-listed. Addressing these shortcomings is crucial to ensure effective regulation and prevent potential consequences for the banking sector.

The bill also proposes the introduction of a regulatory framework for microfinance banking institutions. This initiative aims to enhance access to financial services for underserved populations while empowering the Bank of Namibia with greater authority to resolve failing banking institutions. Enditem

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