It is a fact that the Malawi Savings Bank (MSB) has fallen on hard times. It is failing to meet the minimum liquidity requirements as per Basel III (or the Third Basel Accord) specifications.
Without seeking to bother you with monetary-speak, Basel III isa global, voluntary regulatory framework on bank capital adequacy, stress testing and market liquidity.Basel III requires every bank to have a minimum liquidity reserve of US $5 million.
MSB is 99 percent owned by theMalawi Government which – in itself – is a violation of the law since the laws (Section 53 of the Financial Services Act) do not allow an individual or entity to hold more than 49 percent in a financial institution. (Of course, the Registrar of Financial institutions can waive this requirement.)
But owing to the requirements of the law, the best the government should have done could have been to float 51 percent of its shares on the Malawi Stock Exchangeand not an outright sale to a single entity. This would have allowed MSB to generate enough revenue to meet the Basel III requirements.
Unarguably, most of MSB’s problems border on political interference in its management. Due to political meddling the bank has undertaken some needless costly undertakings.
The bank, for example, was forced to grant concessionary loans to students of public universities. It was also forced to finance the Farm Input Subsidy Programme and the politically-motivatedMardef.
Some politically well-connected individuals were even granted billions worth of unsecured loans. Not surprisingly they are failing to service these loans.
In my view taking politics out of the running of thebank can easily stabilise it.
I am, therefore, inclined to agree with Members of Parliament who feel the bank must not be sold. For those who do not know, the genesis of MSB is the Post Office Savings Bank (POSB) which was established under the Post Office Savings Bank Act (Cap. 44:03 of the Laws of Malawi).
When government decided to form MSB to replace POSB, it should have repealed the Post Office Savings Bank Act. This was not done and, therefore, MSB is – in my view –is a mere brand name for POSB for which Parliament should have a very big say.
Forming MSB to replace POSB and to take over all its assets without first repealing the Post Office Savings Bank Act is actually illegal. POSB is a baby of Parliament and the august House has all the right to demand a say in its future.
MSB is potentially the biggest bank in Malawi with the widest reach. It should not be sold illegally and for a song for that matter.
