THE Parliamentary Committee on Economy, Trade and Labour Matters has disagreed with the Ministry of Finance’s proposal to remove the power to make an inquiry into Bank of Zambia decisions from the court to a tribunal.

The committee, which is chaired by Liuwa UPND member of parliament Situmbeko Musokotwane, said it disagreed with the proposal because it would make the process vulnerable to political influence since the Minister of Finance, who establishes the tribunal, is a political appointee.

Speaking when he presented the Banking and Financial Services Amendment Bill N0.7 of 2020 for second reading in parliament, Friday, Finance Minister Dr Bwalya Ng’andu said the proposed amendment to the Bill sought to redefine the meaning of insolvency to differentiate it from under capitalization.

“Mr Speaker, the proposed amendment to the Banking and Financial Services Act amend to enhance stability and resilient of the financial system and provide additional security and safety for the users of financial services. The House may note that the proposed amendment to the Banking and Financial Services Act N0.7 of 2020 aims to address the following main areas: (a) to redefine the meaning of insolvency to differentiate it from under capitalization. The definition of insolvency has been redefined to give clarity on what insolvency means by providing for insolvency to mean ‘a situation where financial service provider is unable to pay debts and has assets that are insufficient to meet liabilities when they fall due.’ These amendments will redefine the current Act that ties insolvency to under capitalization,” Dr Ng’andu said.

Dr Ng’andu said the Bill also sought to make sanctions against unlicensed financial entities and to further remove a clause which prescribes the number of operating hours for the banks.

“The second feature of the Bill Mr Speaker will be to make sanctions against unlicensed entities more stringent and repayment of funds collected by unlicensed persons. The proposed inclusion is critical to the bank to effectively deal with consumer protection in instances where unlicensed persons take in deposits. The third important feature proposing the amendment Mr Speaker is to remove the clause that includes prescription of operating hours for the bank for the purpose of inspecting registers. The amendment is to provide clarity on timing and form for accessing registers of banks,” said Dr Ng’andu.

“Lastly Mr Speaker, the amendments improves provision relating to the supervisory actions by the banks over regulated entities. Mr Speaker, this particular amendment does not specifically provide for supervision of financial institutions on the prevention and combating of money laundering and financing of terrorism or proliferation of any other offences. So, the amendment that is being proposed will provide for authority over a financial service provider where the bank considers that it is necessary to provide supervision for the purposes of prevention and combating of money laundering.”

But the Parliamentary Committee on Economy, Trade and Labor Matters which was tasked to scrutinize the Banking and Financial Services Amendment Bill N0.7 of 2020 disagreed with some of the proposals.

“The key issues that were prominent in the committee’s interaction with stakeholders. The matters that was of concern to most stakeholders relates to Clause 10 on the amendment of Section 75 of the Principle Act. The committee contends that removing the power to make an inquiry into the decision of the bank (Bank of Zambia) from the court to a tribunal makes the process amendable to political influence since the responsibility to establish the tribunal lies with the minister who is a political appointee. In addition, the committee regrets that the clause is silent on how an aggrieved financial institution can seek redress in an event that the minister declines the request to establish a tribunal. In this regard, the committee strongly recommends that in order to eliminate political influence, and not to disadvantage the aggrieved financial service provider, the process of setting up a tribunal and/or the determination of whether the course of action undertaken by the bank is justified should be a preserve of the court and the aggrieved party must be able to apply to the court to set up a tribunal. This should be explicitly stated in this clause,” Musokotwane said.

Musokotwane said the committee also noted that the Bill did not provide for the reversal of certain decisions made by the Bank of Zambia in events where the bank acted contrary to the law.

“Mr Speaker, another matter of interest relates to Clause 15 (1) which provides for compensation to be paid by the Bank of Zambia to an aggrieved financial service provider where the tribunal establishes that the bank acted contrary to the law. The committee notes with extreme concern that the bill has not provided for the reversal of such a decision. In this regard, the committee recommends that where it clearly established that the decision of the Bank of Zambia was contrary to the law, the bill must explicitly provide for the reversal of the decision of the Bank of Zambia,” said Musokotwane.

“In Clause 12 (1) Mr Speaker, the committee observed that the bill includes executive employees and senior management from the priority list and is silent on how payments to these individuals should be handled. In this vein, the committee strongly recommends that the Bill should be amended so as to explicitly state whether the executive employees and senior management shall be paid after all other expenses and claims have been taken care of or they shall be completely be excluded from the line of payments. The committee has made various recommendations in this report and I urge the executive to positively consider these recommendations in order to improve this piece of legislation.”