My Fellow Malawians,
I would like to address you concerning the matters affecting the Malawi Savings Bank. The current financial position of Malawi Savings Bank has been the subject of discussion at various levels of our society. Parliament has spoken about it; some civil society organizations have also weighed in, and politicians have not kept quiet either.
However, of all those who have spoken about this matter, it is now clear that there is one voice that has either been dampened or not listened to: That voice is the voice of the Regulator of Financial Services and the captains of the financial services industry in Malawi.
My Fellow Malawians,
Not all of us can speak with authority on matters affecting the financial services sector. Those who have ventured to do so have mostly spoken from a partisan point of view or without full knowledge or proper information. As a result, the real and actual financial status of Malawi Savings Bank has been blurred.
My Fellow Malawians,
The problems being faced by Malawi Savings Bank go back several years. The decision to dispose Government’s controlling interest in Malawi Savings Bank was made in 2013. My initial reaction to that decision was that I was not going to be part of it. I had the same reasons as those who are against the transaction now. However, there were strong recommendations from the Regulator of Financial Services as well as the captains of the financial services industry in favour of the disposal. It became clear to me that doing nothing would result in the collapse of the bank and the consequent damage to the financial services industry would be enormous.
My Fellow Malawians,
Malawi Savings Bank is currently grappling with serious liquidity problems. My Government, through the Minister of Finance, Economic Planning and Development has more than once explained the position taken by Government. However, despite his direct and indirect efforts in engaging those opposing the transaction, it is clear that the reasons for opposition are political for some people and sentimental for others. However, the decision of Government regarding the status of Malawi Savings Bank is supported by the Institute of Chartered Accountants in Malawi (ICAM); the private sector; the Regulator of Banks and Financial Services as well as the donor community including the IMF, among others. These are professional bodies and experts on the subject.
My Fellow Malawians,
Apart from the pressing problems of recapitalization and Basel II compliance issues, public discussion has now centred on the toxic loans. The problem of toxic loans which had severely affected the operations of Malawi Savings Bank has been addressed separately.
My Fellow Malawians,
The issue of toxic loans has been an on-going tussle between the Bank and its debtors in the courts. In order to ensure that there is full recovery of all the debts Government has set up a “Special Purpose Vehicle” charged with the responsibility of recovering every Tambala owed to Malawi Savings Bank. No debtor will be spared. The Special Purpose Vehicle is a company which will be managed and directed by eminent and professional persons who have been specially selected because of their professionalism, expertise and skill in the corporate business world. They are eminent Malawians who will act independently and for the good of the country. The details of this arrangement will be gazetted within the next few days.
My Fellow Malawians,
It is important to learn from our past on how similar transactions have been handled. Not too long ago, Air Malawi found itself in a similar situation. There were people who strongly opposed inviting a strategic partner in Air Malawi. There were others who saw the need for that initiative. We argued, quarrelled and rumbled about it. By the time we concluded the transaction, Air Malawi was a mere shell and Government ended up with huge debts to settle. Government would like to avoid a similar situation happening in the case Malawi Savings Bank because it would be more detrimental to the interests of the country than was the case with Air Malawi.
My Fellow Malawians,
Even after the issuance of promissory notes, the recapitalization and liquidity problems of Malawi Savings Bank still remain to be resolved. Recapitalization has been a perpetual challenge in Malawi Savings Bank. The process of recapitalization was triggered by international requirements under Basel II. Like all Banks in the world, the Malawi Savings Bank is subject to those regulatory requirements. As Government, we cannot interfere with such directives as doing so would jeopardize the banking system in Malawi and in turn the economy as a whole.
My Fellow Malawians,
I do not expect that we can achieve consensus on a matter of this nature. Hence, the advice of those in the know is most valuable. However, Government has a duty not to allow the economy to collapse because of our political disagreements. I am, therefore, calling upon everyone to approach this matter with an open mind. As a Nation, we would do well to follow and take the advice and direction which those familiar and experienced in the field of financial services have pointed to us.
My Fellow Malawians,
Having listened to both sides of the debate, Government has decided that the transaction be suspended. During this period, Government intends to review the process that was undertaken. The review will cover all the aspects of the transaction. I am therefore inviting all those who have spoken on this matter including the Members of Parliament, civil society organizations and the experts to come up with reasonable proposals covering all the aspects of the transaction so that we can map the way forward.
My Fellow Malawians,
Let me conclude by restating that it is imperative that Government disposes its interest in Malawi Savings Bank for the good of the National economy. I am, therefore, appealing to all sides of the debate to speak about this matter in a manner which is fair, objective and non-partisan. On my part, I would like to assure the Nation that whatever happens, Government will secure legally binding undertakings to ensure that no single branch of the Malawi Savings Bank is closed.
Thank you for your attention,
Prof. A. P. Mutharika
PRESIDENT OF THE REPUBLIC OF MALAWI