GOVERNMENT NOTICE NO. 28

FINANCIAL SERVICES ACT

(CAP.44:05)

FINANCIAL SERVICES (PROMPT CORRECTIVE ACTION FOR BANKS)

DIRECTIVE, 2018

ARRANGEMENT OF PARAGRAPHS

PARAGRAPH	PART I—PRELIMINARY
1. Citation
2. Objectives	PART II—OBJECTIVES
3. Scope of application
4. Prompt Corrective Actions	PART III—PROMPT CORRECTIVE ACTIONS
5. Revocation	PART IV—MISCELLANEOUS

IN EXERCISE of the powers conferred by section 34 (1) (a) and (2) (g) of the Financial Services Act, I, DR. DALITSO KABAMBE, Registrar of Financial Institutions, make the following Directive—

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PART I—PRELIMINARY

1. Citation

This Directive may be cited as the Financial Services (Prompt Corrective Action for Banks) Directive, 2018.

PART II—OBJECTIVES

2. Objectives

The objectives of this Directive are to—

(a) establish corrective actions that the Registrar may take or impose on banks (while the bank is still under the control of its owners) and the circumstances under which such actions may be taken; and

(b) prescribe the circumstances under which the Registrar or his agent may exercise powers under the existing legal framework to resolve banks (while suspending the rights of the owners and management).

3. Scope of application

The powers specified in this Directive are without prejudice to the general powers of the Registrar under the Financial Services Act, the Banking Act, relevant Regulations and other Directives.

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PART III—PROMPT CORRECTIVE ACTIONS

4. Prompt Corrective Actions

In addition to sanctions and supervisory actions as outlined in the Second Schedule of this Directive; the Registrar shall take prompt corrective action on a bank that falls in each of the categories as outlined in the First Schedule.

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PART IV—MISCELLANEOUS

5. Revocation

The Financial Services (Prompt Corrective Action for Banks) Directive, 2014 is hereby revoked.

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FIRST SCHEDULE

SUMMARY OF PROMPT CORRECTIVE ACTIONS

CATEGORY	BANK CONDITION	MANDATORY SUPERVISORY ACTION
Capital Adequacy Ratio (CAR)	A. UNDERCAPITALISED R BANKS<br>Core Capital Ratio of greater than 8% but less than the prescribed minimum of 10.0 in any one quarter, or banks who, given their financial developments (e.g., worsening asset quality) are expected to breach the minimum requirement on any one quarter.	(a) restrict investment in other subsidiaries, related companies, new branches;<br>(b) restrict investment in fixed assets;<br>(c) restrict dividend payment;<br>(d) financial rehabilitation plan required; and<br>(b) conduct special examination; or<br>(f) place the SCHEDULE, under the Registrar’s under the SCHEDULE, under the Registrar's Watch List for increased monitoring and inform bank of such status.
	B. SIGNIFICANTLY UNDERCAPITALISED BANKS<br>Core Capital Ratio of equal to or greater than 2% but less than 3%	A combination of the following may be used in addition to the continuation of measures above—<br>(a) restrict new lending or recoveries to recoveries to recoveries to recoveries to zero-based lending to recover-made in new subsidiaries, under the Registrar's Watch List for increased monitoring and inform bank or such status.
	C. CRITICALLY UNDERCAPITALISED BANKS	Any one or a combination of the

SECOND SCHEDULE

GENERAL ENFORCEMENT ACTIONS (IN addition to sanctions and supervisory actions as outlined in the First Schedule of this Directive; the Registrar shall take prompt corrective action on a bank that falls in each of the Revocation

The Financial Services (Prompt Corrective Action for banks) Directive, 2014 is hereby revoked.

FIRST SCHEDULE

SUMMARY OF PROMPT CORRECTIVE ACTIONS

CATEGORY	BANK CONDITION	MANDatoryory supervisory action
Capital Adequacy Ratio (CAR)	A. UNDERCAPITALISED R bank with a Core Capital Ratio of greater than 8% but less than the prescribed minimum of 10.0 in any one quarter, or banks who, given their financial developments (e.g., worsening asset quality) are expected to breach the minimum requirement on any one quarter.	(a) restrict investment in other subsidiaries, related companies, new branches; (b) restrict investment in fixed assets; (c) restrict dividend payment; (d) financial rehabilitation plan required; and (first page of 2 pages)
	B. SIGNIFICANTLY UNDERCAPITALISED BANKS with a Core Capital Ratio of equal to or second page of 2 pages	A combination of the following may be used in addition to the continuation of measures above— (a) restrict new lending or recoveries to recoveries to zero-based lending; (second page of 2 pages)
	C. CRITICALLY UNDERCAPITALISED BANKS	Any one or a combination of the IN the Registrar's Watch List for increased monitoring and inform bank financial condition.
	D. FAILED BANk	The Registrar may take any action necessary to protect the financial system and protect depositors protection.
	E. FAILED BANK	The Registrar may take any action necessary to protect the text in the Registrar's Watch List for increased monitoring and inform bank of such status.
	E. FAILED BANK	The Registrar may take any broad of actions necessary to protect the first page of second page of 2 pages
	e. FAILED B table