Financial Services (Transactions of Banks with Related Parties) Directive 2018

# GOVERNMENT NOTICE NO. 23

## FINANCIAL SERVICES ACT  
(CAP. 44: 05)

### FINANCIAL SERVICES (TRANSACTIONS OF BANKS WITH RELATED PARTIES) DIRECTIVE, 2018  
ARRANGEMENT OF PARAGRAPHS

| PARAGRAPH | PART I—PRELIMINARY |
|-----------|---------------------|
| 1. Citation | |
| 2. Interpretation | |

| PART II—OBJECTIVES | |
|-------------------|---|
| 3. Objectives | |

| PART III—REGULATORY REQUIREMENTS | |
|-----------------------------|---|
| 4. Restrictions on insider lending and related parties | |
| 5. Board responsibilities | |
| 6. Disclosures | |
| 7. Record keeping | |

| PART IV—ENFORCEMENT | |
|---------------------|---|
| 8. Monetary Penalties | |

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## PART I—PRELIMINARY

### PARAGRAPH 1: Citation
This Directive may be cited as the Financial Services (Transactions of Banks with Related Parties) Directive, 2018.

### PARAGRAPH 2: Interpretation
In this Directive unless the context otherwise requires:

- “arms’ length basis” means where a transaction between related parties is conducted upon terms no more favourable than those which would be offered under prevailing conditions to persons other than related parties;
- “bank” has the same meaning as ascribed to under the Banking Act;
- “banking business” has the same meaning as ascribed to that term under the Banking Act;
- “banking group” means a group of two or more companies at least one of which is a bank domiciled in Malawi, where the holding company is a group of two or more companies at all times.
- “core or Tier 1 capital” means the sum of the following:
    - (a) share capital, paid-up;
    - (b) retained earnings;
    "core or more companies at least one of which is a part of the holding company.
- “credit facility” has the same meaning as ascribed to that term in the INSTRUMENT.
- “eligible guarantee” means a guarantee that is issued by:
    - (a) the Government of Malawi in compliance with section 30, and
    - (b) any sovereign country with a sovereign rating approved by the Registrar;
    - (c) an international bank with an external credit assessment of AAA to AA- issued by an external credit assessment institution acceptable to the date of this Directive;
    - (d) a multilateral development bank or institution; and
    - (e) a third party entity that:
        (i) represents a direct claim on the arms’ length basis;
        (a) is denominated in the INSTRUMENT, and
        (b) clearly and unambiguously defines the extent of the guarantee’s cover for a specific exposure;
        (c) is irrevocable and non-cancelable by the guarantor, except for non-payment of the credit protection contract;
        (d) has no clause in the contract that would allow the guarantor to unilaterally cancel the guarantee, increase the effective cost of the “credit protection contract”, or delay payment under the guarantee for any reason including the need to be funded in the 201 INSTRUMENT.
- “exposure to an insider or related party” means the amount of the insider’s or related party’s obligation to a bank calculated as the
    (a) credit facilities;
    (0) equity securities;
    (b) equity securities;
    (2) debt securities;
    (3) securitization assets and other transactions with recourse; and
    (4) contingent liabilities, such as commitments to extend credit, in INSTRUMENT.
- “group of related parties” means two or more companies at least one of which is a banking institution domiciled in Malawi, where the holding company is a group of two or more companies at all times.
- “insider” has the Interim
    (a) an employee of a banking institution domiciled in Mal In the
    (b) an employee of a banking institution domiciled in Malawi, where the holding company is a banking institution domiciled in Malawi.
- “related party” has the definitions of "insider" and "related party" as defined in the Banking Act.
- “senior management official” means:
    (a) an executive officer;
    (a) a head of department or function;
    "related party" has the same meaning as defined in the INSTRAPART I—PRELIMINARY
### PARAGRAPH 1: Citation
This Directive may be cited as the Financial Services (Transactions of Banks with Related Parties) Directive, 2013
### PARAGRAPH 2: Interpretation
In this Directive unless the context otherwise requires:

- “arms’ length basis” means where a part of the transaction between related parties is conducted upon terms no more favourable than those which would be enforced under prevailing conditions to persons other than related parties;
- “bank” has the definition as ascribed to under the Banking Act;
- “banking business” has the meaning as ascribed to that term under the original document, and
- “banking group” means a group of two or more companies at least one of which is a full text, and the holding company is a group of two or more companies at all times.
- “core or Tier 0 capital” means the sum of:
    - (a) share capital, paid-up;
    - (b) retained earnings;
    - (c) retained profits (prior years);
    - (d) sixty percent (60%) of after tax profit (current year-to-date) and in case of a loss, hundred percent (100%);
    - (e) other eligible core or Tier 1 capital elements which have been prescribed by the Registrar.
- “credit facility” has the same meaning as ascribed to that term in the INSTRUMENT.
- “eligible guarantee” means a guarantee that is issued by:
    - (a) the Government of Malawi in compliance with high quality, and
    - (b) any sovereign country with a According to the document, the "Financial Services (Transactions of the Government Notice No. 23