BANKING AND FINANCIAL SERVICES ACT
Arrangement of Sections
Section
PART I
PRELIMINARY PROVISIONS
1. Short title
2. Interpretation
3. Application of Act
4. Relationship with other Acts
PART II
LICENSING OF FINANCIAL SERVICE PROVIDERS
5. Types of licences
6. Providing banking business, financial business or financial services without licence
7. Application for banking, financial business or financial institution licence
8. Grant of licence
9. Display of licence
10. Rejection of application for licence
11. Validity of licence
12. Authorised activities of banks
13. Transfer, pledge, assignment, encumbrance of licence
14. Variation of licence
15. Amendment of licence
16. Surrender of licence
17. Suspension or cancellation of licence
18. Loss or damage of licence
19. Opening branches, subsidiaries and other establishments
20. Representative office
21. Register of financial service providers
22. Publication of financial service providers
23. Appointment of Registrar and Deputy Registrars
24. Financial inclusion
PART III
OWNERSHIP AND CONTROL OF FINANCIAL SERVICE PROVIDERS
25. Limit on voting control
26. Divestment of control
27. Ownership
28. Prohibition of ownership of shares by trusts
29. Corporate restructuring transactions
30. Requirements for corporate restructuring transaction
31. Effect of corporate restructuring transaction
PART IV
CORPORATE GOVERNANCE
32. Responsibilities of Directors
33. Board meetings
34. Qualifications of directors, chief executive officers, chief financial officers
35. Non-executive directors to be in majority
36. Reporting obligations of Board and directors
37. Conduct of directors, chief executive officers, chief financial officers and managers
38. Disclosure of interest
39. False statement and obstruction of examinations
40. Suspension or dismissal of directors and senior officers by Bank and removal of shareholders
41. Fit and proper requirements
42. Corporate governance
PART V
BUSINESS OPERATIONS
43. Principal administrative office
44. Use and alteration of name
45. Business hours
46. Bank holiday
47. Records to be registered and maintained
48. Credit documentation
49. Manner of keeping records
50. Retention of records
51. Maintenance of records
PART VI
REGULATORY AND SUPERVISORY POWER BANK
52. Minimum capital requirements
53. Capital conservation buffer
54. Counter cyclical capital buffer
55. Restriction on payment of dividends
56. Leverage ratio
57. Maintenance of liquidity
58. Constraints on contracts with associated person
59. Examination of financial service providers
60. Submission of returns
61. Consolidated supervision
62. Affiliates and cross-border supervision
62A. Anti-money laundering and counter financing of terrorism supervision
63. Unsafe and unsound practices
64. Supervisory actions
65. Financial service provider suffering large losses
66. Undercapitalised financial service provider
67. Significantly undercapitalised financial service provider
68. Corrective actions against financial businesses
69. Modification, cancellation and upholding of regulatory statement
70. Notice of taking possession
71. Powers and duties of Bank on taking possession
72. [Repealed.]
73. Possession of financial service provider by Bank
74. [Repealed.]
75. Application to Court for termination of possession
76. Effects of possession
77. Restructuring and reorganisation
78. Refusal of restructuring or reorganisation
79. Restriction on execution of judgment
80. Recovery of expenses
PART VII
RESTRICTIONS ON TRANSACTIONS OF FINANCIAL SERVICE PROVIDERS
81. Secured borrowing
82. Limitations on granting credit facilities
83. Restriction on trade
84. Restriction on equity investments
85. Restriction on lease or other interest in real property
86. Limits, restrictions and prohibition on financial business and alternative financial services
87. Exemption of alternative financial services
PART VIII
FINANCIAL STATEMENTS AND ACCOUNTABILITY
88. Annual financial statement
89. Presentation of annual financial statement to shareholders
90. Reserve for bad and doubtful debts
91. Approval of annual financial statements
92. Publication of annual financial statements
93. Appointment of external auditor
94. Responsibilities of external auditor
95. Information by external auditor to Bank
96. Disqualification of external auditor
97. Access to information and auditor’s report
98. Termination of appointment of external auditor
99. Statement on resignation of external auditor
100. Termination of appointment of external auditor by financial service provider
PART IX
ANTI-COMPETITIVE ACTIVITIES AND CONSUMER PROTECTION
101. Collusive conduct
102. Collateral contracts
103. Coercive behaviour
104. Misconduct during debt collection
105. Determination of benchmark base rate
106. Disclosure of interest rates and charges
107. Increase in service charges
108. Responsible lending
109. Prohibition against penal interest
110. Recoverable amounts on nonperforming loan
111. Data protection and disclosure of information
112. Prohibition of anti-competitive practice
113. Complaints procedure for customers
114. Ombudsperson for financial service providers
115. Control of advertisements
116. Prohibition of unfair business practices
117. Prohibition of charges on prepayment
118. Unfair contract terms
119. Recognition of other laws
PART X
INSOLVENCY, DISSOLUTION AND LIQUIDATION OF FINANCIAL SERVICE PROVIDERS
120. Acceptance of deposits by insolvent financial service providers
121. Resolution to voluntarily wind-up or dissolve financial service provider
122. Duties of financial service provider on voluntary winding-up or dissolution
123. Notice of voluntary winding-up or dissolution
124. Rights of depositors and creditors
125. Distribution of assets on voluntary winding-up or dissolution
126. Powers of Bank where assets insufficient or completion unduly delayed
127. Powers of Bank in compulsory winding-up or dissolution
128. Powers of liquidator
129. Immunity of Bank against depositor or creditor claims
130. Limitation on filing of claims
131. Objection to liquidation schedule
132. Priority of creditors
133. Undistributed funds
134. Final distribution in compulsory winding-up or dissolution
135. Restriction of action by third parties
136. Power of Bank in relation to insolvent financial business
PART XI
COMPLAINTS AND APPEALS PROCESS
137. Reasons for decisions and right to be heard
138. Right of appeal
139. Appointment and convening of tribunal
140. Powers of tribunal
141. Decision of tribunal
PART XII
GENERAL PROVISIONS
142. Investigations
143. Access to documents
144. Offences committed partly in and partly out of Zambia
145. Continuing acts or offences
146. Actions by Bank on conviction for offence
147. Use of word "bank"
148. Restriction on use of name to indicate banking or financial business or financial service provider
149. Validity of certain acts by financial service provider
150. Power to summon officers, directors and shareholders
151. Submission of information and documents to Bank
152. Alternative financial services
153. Publication of information
154. Extension of time limits
155. False document
156. Immunity of officer, agent or employee of Bank
157. Money circulation schemes
158. Utilisation of collateral for settlement of certain obligations
159. Special reserve or liability insurance
160. Unclaimed funds and personal property
161. Delegated supervision
162. Exemptions
163. General penalty
164. Offences by body corporate or unincorporated body
165. Administrative penalties
166. Industry reports
167. Regulatory statements
168. Rules
169. Regulations
170. Repeal of Cap. 387
171. Savings and transitional provisions
AN ACT
to provide for a licensing system for the conduct of banking or financial business and provision of financial services; to provide for the incorporation of standards, principles and concepts of corporate governance in institutional systems and structures of banks and financial institutions; to provide for sound business practices and consumer protection mechanisms; to provide for the regulation and supervision of banking and financial services; to repeal and replace the Banking and Financial Services Act, 1994; and to provide for matters connected with, or incidental to, the foregoing.
[18th May, 2018]
Act 7 of 2017,
Act 7 of 2020,
SI 38 of 2018.
PART I
PRELIMINARY PROVISIONS
This Act may be cited as the Banking and Financial Services Act.
(1) In this Act, unless the context otherwise requires—
"advance" means—
(a) any direct or indirect payment of moneys, a loan or an extension of credit to a person or common enterprise—
(i) made on the basis of an obligation of that person or common enterprise repaying the funds; or
(ii) repayable from specific property pledged by, or on behalf of, a person or common enterprise;
(b) the credit risks arising from actual claims, potential claims and credit substitutes; or
(c) a commitment to extend credit or acquire a debt security or other right to payment of a sum of money;
"alternative financial service" means a financial service that applies specific regulatory rules based on religious principles;
"associated person" means—
(a) a company in which a person is a manager or director;
(b) each person that beneficially owns shares in the same company;
(c) a third person that owns or exercises, or is capable of exercising, directly or indirectly, significant control over a company or person referred to in paragraph (a) or (b);
(d) persons that are in a partnership;
(e) persons that are both members of a voting trust or other arrangement relating to shares, except that this paragraph does not apply to a financial business where—
(i) two or more persons are affiliated if the persons are companies that are controlled by the same person; and
(ii) a company is the subsidiary of another company and if more than 50 per cent of the issued voting shares of the company, other than qualifying directors’ shares, are owned directly or indirectly by the other company; or
(f) the spouse, parent, child, brother or sister of a person, or of the person’s parent, child, brother or sister;
"associate and association" shall be construed accordingly;
"articles of association" has the meaning assigned to the term in the Companies Act;
"bank" means a company authorised to conduct banking business in accordance with this Act;
"Bank" means the Bank of Zambia established in accordance with the Constitution;
"banking licence" means a licence specified in section 5 and granted in accordance with section 8;
"banking business" means—
(a) receiving deposits, including chequing and current account deposits, and the use of the deposits, either in whole or in part, for the account and at the risk of the person carrying on the business to make loans, advances or investments;
(b) providing financial services; and
(c) any custom, practice or activity, prescribed in rules issued by the Bank, as banking business;
"beneficial owner" means an individual who—
(a) exercises control over a financial service provider, legal person or arrangement; or
(b) owns or controls a customer or the person on whose behalf a transaction is conducted and, where two or more persons are associated through the beneficial ownership of shares in the same company, each person shall be a beneficial owner of the aggregate number of shares of the company;
"board" means the governing body of a financial service provider;
"body corporate" has the meaning assigned to the word in the Companies Act;
"borrower" includes a person who becomes indebted to a financial service provider due to a guarantee made for the repayment of an amount owed by another person;
"branch" means the permanent premises, other than the head office, at which a financial service provider conducts business in or outside Zambia;
"branchless banking" means the provision of banking services or financial services without relying on physical branches;
"bridge bank" means an institution created by the Bank to temporarily operate a failed bank or financial institution until a buyer is found for its operations;
"capital adequacy" means the legal capital prescribed by the Bank in terms of money or assets invested or available for investment in the business that is sufficient for the sustainability of the financial service provider;
"capital conservation buffer" means the mandatory capital that financial institutions are required to hold, in addition to minimum capital requirements, as prescribed, to be drawn down when losses are incurred during periods of stress;
"chief executive officer" means the person engaged by a financial service provider who is responsible, under the immediate authority of the board, for the conduct of banking business or financial services for the financial service provider;
"chief financial officer" means a person responsible for maintaining the accounts and accounting records of a financial service provider;
"chief risk officer" means a senior employee of a financial service provider with distinct responsibility for risk management functions and the financial service provider’s enterprise-wide risk management framework;
"company" has the meaning assigned to the word in the Companies Act;
"common enterprise" means an undertaking of two or more persons with an equal right to direct and benefit from the undertaking and where the negligence of any of the persons may be imputed to the others;
"common equity tier one" means the sum of the following—
(a) paid-up common shares issued by a financial service provider;
(b) share premium, resulting from the issue of common shares;
(c) retained earnings;
(d) accumulated comprehensive income and other disclosed reserves;
(e) common shares issued by consolidated subsidiaries of the financial service provider and held by a third party that meets the criteria prescribed by the Bank, for inclusion in common equity tier one capital; and
(f) regulatory adjustments, applied in the calculation of the common equity tier one, as prescribed by the Bank;
"compliance officer" means a senior employee of the financial service provider with overall responsibility for co-ordinating the identification and management of the financial service provider’s compliance risk and supervising the activities of the other employees responsible for the compliance functions of the financial service provider;
"confidential information" means information that is not public, regarding—
(a) the nature, amount or purpose of any payment made by or to a person;
(b) the recipient of a payment made by a person;
(c) the assets, liabilities, financial resources or financial condition of a person;
(d) the business or family relations of a customer; or
(e) any information of a personal nature that the customer disclosed, in confidence to the financial service provider;
"consumer" has the meaning assigned to the word in the Competition and Consumer Protection Act;
"control" means the control of a financial service provider by a person that—
(a) beneficially owns more than one half of the issued share capital of the company;
(b) is entitled to cast a majority of the votes that may be cast at a general meeting of the company, or has the ability to control the casting of a majority of those votes, either directly or through a controlled entity of that person;
(c) is able to appoint or to veto the appointment of a majority of the directors of the company;
(d) is a holding company and the financial service provider is a subsidiary of that company as provided for in the Companies Act; or
(e) has the ability to significantly influence the management, policy and affairs of the financial service provider in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in paragraphs (a) to (d);
"corporate" means a legal entity, including a company or body corporate, that is separate and distinct from its owners and which is recognised as such by law and acts as a single entity;
"corporate restructuring transaction" means a merger, takeover, amalgamation, reconstruction or acquisition where an entity, directly or indirectly, acquires or establishes control over the whole or part of the business of a financial service provider or where two or more financial service providers and another entity agree to adopt arrangements for common ownership or control over the whole or part of the business of a financial service provider, and includes such arrangements by an entity outside Zambia which affect a financial service provider in Zambia;
"counter cyclical capital buffer" means an amount of capital prescribed by the Bank to be maintained by banks and financial institutions where there is excessive build-up of credit that is likely to lead to a system wide risk;
"Court" means the High Court of Zambia;
"credit facility" includes an advance, loan, financial guarantee or any other liability incurred by a person;
"customer identification data" means—
(a) in the case of a natural person, the person’s—
(i) name, including any forename or maiden name;
(ii) permanent address;
(iii) telephone number, fax number or e-mail address;
(iv) date and place of birth;
(v) nationality;
(vi) occupation or public office held and the name of the employer;
(vii) official personal identification number or other unique identifier contained in a valid official document that bears a photograph of the person;
(viii) bank or other type of account and the nature of the relationship the person has with a financial service provider; and
(ix) signature; and
(b) in the case of a corporate, that corporate’s—
(i) registered name;
(ii) principal place of business;
(iii) mailing address;
(iv) contact telephone, fax number or electronic mail address;
(v) official identification number, such as the tax identification number or official registration number;
(vi) documents such as the original or certified copy of the certificate of incorporation, registration, articles of association or other internal governing rules confirming the legal existence of the account holder; and
(vii) board resolution to open an account and the identification documents of the persons authorised to operate the account;
"deposit" means—
(a) an amount of money received by a bank or financial institution in the ordinary course of business that—
(i) the bank or financial institution may transform into assets at its own risk;
(ii) is repayable on demand or at a specified or unspecified date, or on terms agreed to, by, or on behalf of, the person making the payments;
(b) an outstanding draft, a cashier’s cheque, money order or other officer’s cheque issued by the bank or financial institution and drawn on a customer’s funds for any purpose, in the ordinary course of business; or
(c) such other obligations of a bank or financial institution as the Bank may prescribe by rules issued in accordance with this Act,
excluding electronic money and instruments issued by a bank or financial institution in respect of an advance or for the purpose of fulfilling a payment for goods supplied or services rendered to the Bank;
"Deputy Registrar" means a person holding office or acting as a Deputy Registrar of Financial Service Providers appointed in accordance with this Act;
"director" means a natural person who holds office as a member of a board;
"discretionary payments" means any payments or distributions, other than dividends, that are within the discretion of the financial service provider to make and, if not paid by the financial service provider, are not an event of default, including staff bonuses;
"equity interest in a person" means—
(a) in the case of a company, any share issued by a company, the terms of which entitle the registered holder or bearer to a share in the profits of the company; or
(b) in the case of a partnership, association or other body of persons acting in concert, any right to share in the profits of that partnership, association or other body of persons acting in concert;
"equity interest in a property or undertaking" means an ownership interest, and includes any right to share in the profits of the operation or proceeds of disposition of the property or undertaking;
"financing" means the act or process of raising or providing funds;
"fit and proper requirements" means the criteria set by the Bank in accordance with section 41 and as the Bank may prescribe;
"financial business" means a body corporate that conducts a financial service business, excluding acceptance of deposits;
"financial business licence" means a licence specified in section 5(b) and granted in accordance with section 8;
"financial derivative" means a contract between two or more parties whose value is based on an agreed upon underlying financial asset, index or security;
"financial institution" means a company, other than a bank, providing a financial service;
"financial institution’s licence" means a licence specified in section 5(c) and granted in accordance with section 8;
"financial sector" means the subsector of the economy concerned with or related to financial, banking and monetary matters and provision of banking and financial services to commercial and retail customers including banks, investment funds and capital markets;
"financial service" means any one or more of the following services—
(a) commercial or consumer financing services;
(b) brokering;
(c) factoring, with or without recourse;
(d) finance leasing;
(e) financing of commercial transactions, including forfeiting;
(f) issue and administration of credit cards, debit cards, traveller’s cheques or banker’s drafts;
(g) issue of guarantees, performance bonds or letters of credit, excluding those issued by insurance companies;
(h) lending on the security of, or dealing in, mortgages or any interest in real property;
(i) payment of cheques or other demand orders drawn or issued by customers and payable from deposits held by the payer;
(j) purchase and sale of foreign exchange;
(k) issue of debentures and money market instruments;
(l) the acceptance of deposits;
(m) issue of building society and mutual society shares, with characteristics similar or identical to deposits;
(n) venture capital funding;
(o) micro-financing;
(p) development financing; and
(q) any other service that the Bank may designate, excluding the underwriting, marketing or administration of contracts of insurance or reinsurance;
"financial service provider" means a bank, financial institution or financial business;
"foreign financial service provider" means a financial service provider that is not incorporated in Zambia;
"foreign company" has the meaning assigned to the word in the Companies Act;
"insider" means—
(a) an officer, director or principal shareholder of a bank or financial institution;
(b) a person who participates or has the authority to participate in major policy-making functions of a bank or financial institution, whether or not employed by the bank or financial institution;
(c) a bank or financial institution in which a person referred to in paragraph (a) or (b) owns, directly or indirectly, alone or with one or more other persons specified in the paragraphs, more than 20 per cent of the shares; or
(d) a company in which a bank or a financial institution owns more than 10 per cent of the outstanding shares;
"insolvency" means a situation where a financial service provider—
(a) is unable to pay a debt when it falls due;
(b) has assets that are insufficient to meet liabilities; or
(c) has regulatory capital which is at zero or lower;
["insolvency" subs by s 2 of Act 7 of 2020.]
"licence" means a banking licence, financial institution licence, or financial business licence as the case may be;
"licensee" means a financial service provider holding a licence;
"manager" means an officer of a financial service provider who is in a position to control, direct or influence decision-making in a matter relating to banking business or financial services;
"meeting" has the meaning assigned to the word in the Companies Act;
"merchant banking" includes the underwriting of securities for corporations, advising on and arranging finance for mergers and takeover bids, the financing of foreign trade by accepting bills of exchange, underwriting new issues and investment management;
"money circulation scheme" means a plan, arrangement, agreement or understanding, between two or more persons that involves the pooling and distribution of funds by recruitment of subscribers, and which, for its continuous existence and realisation of its benefits, substantially depends on the incremental recruitment of subscribers for an unspecified period;
"money market instrument" means a negotiable instrument with an original term to maturity of 365 days or less;
"name" means the name by which a financial service provider is incorporated as provided by the Companies Act;
"nominee shareholder" means a person whose name appears on a company’s register as the registered shareholder but who holds the shares on behalf of another person;
"nonperforming loan" means a loan in respect of which payment of principal or interest is in arrears for more than 90 days;
"physical presence" means the physical location of a financial service provider within Zambia, or the control of the financial service provider;
"practitioner" has the meaning assigned to the word in the Legal Practitioners Act;
"primary capital" means the sum of the—
(a) common equity tier one; and
(b) additional tier one capital, as prescribed by the Bank by rules issued in accordance with this Act;
"principal administrative office" means the office in which the overall administration of the affairs of a financial service provider, other than its banking business or financial service business, is carried on;
"Register" means the Register of Financial Service Providers established and maintained in accordance with section 21;
"Registrar" means the person holding office or acting as the Registrar of Financial Service Providers appointed in accordance with this Act;
"Registrar of Companies" means the person appointed as Registrar in accordance with the Patents and Companies Registration Agency Act;
"Registrar of Lands and Deeds" means a person appointed as a Registrar in accordance with the Lands and Deeds Registry Act;
"regulatory capital" means the sum of the—
(a) primary capital; and
(b) secondary capital, as prescribed by the Bank, in rules issued in accordance with this Act;
"related party transaction" means a transaction in which two or more persons, by virtue of their relationship, benefit severally or jointly from funds or services arising from a transaction involving any one of them and a financial service provider;
"regulatory statement" means directives, guidelines, orders, circulars and bulletins issued by the Bank for the efficacious implementation of this Act, regulations and rules issued in accordance with this Act;
"repealed Act" means the Banking and Financial Services Act;
"representative office" means an office in Zambia belonging to or representing a foreign financial service provider;
"senior officer" means a chief executive officer, chief financial officer, manager or other management personnel of a financial service provider;
"shell bank" means a bank which does not have a physical presence in the country in which it is incorporated and licenced and which is unaffiliated with a regulated group to any financial service that is subject to consolidated statutory regulation supervision;
"significant shareholding" means a direct or indirect shareholding or beneficial interest of 10 per cent or more of the share capital of a financial service provider, and the words "significant shareholder" shall be construed accordingly;
"subsidiary" has the meaning assigned to the word in the Companies Act;
"tribunal" means an ad hoc tribunal to determine appeals constituted in accordance with section 139;
"unsafe and unsound practice" means—
(a) conducting the affairs of a financial service provider in a manner that is—
(i) detrimental to the stability of the financial sector or the interests of depositors and creditors;
(ii) prejudicial to the interest of the financial service provider; or
(iii) in contravention of this Act or any other relevant written law;
(b) accumulating a high volume of nonperforming loans;
(c) making secured loans based on inadequate collateral;
(d) maintaining an inadequate level of reserves for loan losses;
(e) maintaining an inadequate level of common equity capital;
(f) advancing loans without regard to the borrower’s ability to pay;
(g) maintaining inadequate liquidity; or
(h) any other practice that the Bank may designate as unsafe and unsound practice;
"venture capital funding" means risk capital given by investors to start up small or medium sized businesses with perceived high growth potential, and includes the mobilisation of funds from various sources in risky projects that would not normally attract conventional finance;
"voting shares" means common shares in the capital of a financial service provider and any other shares of any designation or description that carry the right to vote on a resolution at a meeting; and
"Zambia Institute of Chartered Accountants" means the Institute established in accordance with the Accountants Act.
(2) In this Act, unless the context otherwise provides, words and expressions used and which are not defined, but are defined in the Companies Act, the Corporate Insolvency Act, the Securities Act, or any other relevant Act, shall have the meaning assigned to them in those Acts.
(1) This Act applies to all financial service providers.
(2) This Act does not apply to—
(a) the Bank, except in so far as it expressly imposes a duty on the Bank; and
(b) a person registered in accordance with the Money Lenders Act.
4. Relationship with other Acts
(1) Where any written law relating to, or impacting on, banking business or financial services is inconsistent with this Act, the provisions of this Act shall, to the extent of the inconsistency, prevail.
(2) Despite sub-section (1), where there is an inconsistency between this Act and the Securities Act in relation to the regulation of securities, the Securities Act shall prevail to the extent of the inconsistency.
PART II
LICENSING OF FINANCIAL SERVICE PROVIDERS
The following licences shall be issued by the Bank in accordance with this Act—
(a) a banking licence, which shall authorise a licensee to conduct a banking business;
(b) a financial business licence, which shall authorise a licensee to conduct a financial business; and
(c) a financial institution licence, which shall authorise a licensee to provide a financial service.
6. Providing banking business, financial business or financial services without licence
(1) A company shall not conduct a banking business without a banking licence.
(2) A body corporate shall not conduct a financial business without a financial business licence, or provide a financial service without a financial institution licence.
(3) A person, without a banking licence, financial institution licence or a financial business licence, shall not collect funds by purporting to conduct a banking business, financial service or financial business.
(4) A person who contravenes sub-sections (1), (2) and (3) commits an offence and is liable, on conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.
(5) Where a person obtains funds under sub-section (3), that person shall, in addition to the penalty imposed under sub-section (4), repay the funds in accordance with the Bank’s directives and within the period determined by the Bank.
(6) Where funds repayable under sub-section (5) remain unpaid at the end of the period determined by the Bank for repayment, the funds payable shall be recoverable by the Bank and kept in trust for the person lawfully entitled to the funds.
[S 6 subs by s 3 of Act 7 of 2020.]
7. Application for banking, financial business or financial institution licence
(1) An application for a banking licence, financial institution licence or financial business licence shall be made in the prescribed manner and form.
(2) An application for a licence, specified in sub-section (1), shall be accompanied by the prescribed application fee and shall have attached to it or contain the following—
(a) articles of association or other constitutive documents;
(b) physical and postal addresses of the principal administrative office;
(c) permanent residential addresses of the applicant’s directors, chief executive officer, managers;
(d) name and permanent residential address of every subscriber for any class or series of shares issued by the applicant;
(e) addresses of each branch proposed to be opened by the applicant and, in the case of a mobile office, the area proposed to be served;
(f) full particulars of the business it proposes to conduct;
(g) amount of the applicant’s capital; and
(h) names of the applicant’s associates and affiliates.
(3) An applicant may withdraw an application for a licence, by notice in writing to the Bank, in the prescribed manner and form, at any time before the licence is granted or the application is rejected.
(4) The Bank shall, in considering an application for a licence, made in accordance with sub-section (1), have regard to the—
(a) capital adequacy of the applicant;
(b) financial condition, resources and history of the applicant;
(c) applicant’s associates and affiliates;
(d) transparency of the legal, operational, managerial, governance and ownership structures;
(e) character and experience of the directors, significant shareholders, beneficial owners, founders or persons proposing to be concerned in the management of the banking business, financial business or financial service;
(f) convenience and needs of the community intended to be served by the banking or financial business or provision of a financial service; and
(g) prospects for the profitable operation of the banking or financial service business.
(1) Where an applicant meets the requirements of this Act, the Bank shall, within 120 days of receipt of an application for a licence made in accordance with section 7, grant a licence.
(2) A banking licence, financial business licence or financial institution licence for a subsidiary of a foreign company may be granted if—
(a) the foreign company is a financial service provider and is authorised to engage in banking business in the country where its principal place of business is located; and
(b) the Bank determines that the foreign financial service provider is adequately supervised by competent authorities in the country of incorporation.
(3) A licence granted in accordance with sub-section (1) or (2), may—
(a) contain terms and conditions that the Bank may determine in relation to the business as specified in this Act;
(b) provide for the payment of annual or other periodic fees that may be prescribed; and
(c) require the financial service provider to allow the Bank access to the offices, records, documents and information of the financial service provider whether inside or outside Zambia.
(4) A financial service provider shall not provide or offer to provide banking or financial services in breach of the terms and conditions of the licence.
A financial service provider shall display the licence issued to the financial service provider in a prominent place at its business premises.
10. Rejection of application for licence
(1) The Bank shall reject an application for a licence where—
(a) an applicant does not meet the requirements of this Act;
(b) a licence previously held by an applicant has been cancelled by the Bank;
(c) an applicant submits false information in relation to the application; or
(d) the name that a financial service provider is proposing to be registered is—
(i) identical with that of another financial service provider; or
(ii) resembles the name of another financial service provider and is likely to deceive the public.
(2) Where the Bank rejects an application for a licence, the Bank shall inform the applicant of its decision, in writing, within seven days of making the decision and shall give reasons for the rejection.
A licence shall remain valid unless surrendered by the financial service provider or cancelled by the Bank.
12. Authorised activities of banks
(1) A banking licence may, subject to the conditions of the licence, authorise a bank to engage in the following activities in addition to banking business—
(a) grant loans and extend credit, whether unsecured or on the security of property of any kind;
(b) deal as a principal or an agent in the currency of Zambia and, subject to the rules and regulatory statements, made in accordance with this Act, in the currency of any other country, foreign exchange transactions, gold, silver, platinum, bullion or coins;
(c) provide money transfer or transmission services from a customer’s account;
(d) issue and administer payment, credit or debit cards and, in co-operation with other prescribed service providers, the operation of payment, credit card and debit card systems;
(e) act as a trustee, executor or administrator of an estate or in any fiduciary capacity for any person;
(f) act as a financial agent for any person;
(g) provide safe-keeping and custodial services for financial assets and securities;
(h) provide merchant banking services, including the arrangement and underwriting of shares, trade financing, corporate financing and provision of financial advice;
(i) deal as a principal or agent for its customers in financial derivatives; and
(j) provide branchless banking services.
(2) The Bank may prescribe other authorised activities that may be undertaken by financial service providers which are not inconsistent with this Act.
13. Transfer, pledge, assignment, encumbrance of licence
(1) Subject to sub-section (2), a licence may, with the prior written approval of the Bank, be transferred, pledged, assigned or encumbered in the event of a corporate restructuring transaction.
(2) An application for a transfer, pledge, assignment or encumbrance of a licence, as specified in sub-section (1), shall be made to the Bank in the prescribed manner and form.
(3) The Bank may, within 30 days of receipt of an application made in accordance with sub-section (2)—
(a) approve the application on such terms and conditions as the Bank may determine; or
(b) reject the application and give reasons for the rejection.
(1) Subject to sub-section (2), the Bank may, on the application of a licensee or by its own motion, vary the terms and conditions of a licence.
(2) The Bank shall, before varying the terms and conditions of a licence, in accordance with sub-section (1), give notice, in writing, to the licensee of the Bank’s intention to make variations in the manner specified in the notice.
(3) The licensee may, within 30 days of receipt of the written notice, specified in sub-section (2), make written representation to the Bank on the proposed variation.
(4) The Bank shall, in deciding whether to vary a licence, have regard to section 7.
(5) The Bank shall, on varying a licence in accordance with this section, notify the licensee of the variation, in writing, and the notice shall state the effective date of the variation.
(6) Compensation shall not be payable by the Bank to a financial service provider for a variation to a licence made in accordance with this section.
(1) The Bank may, on application by a licensee, and on payment of a prescribed fee, amend a licence where—
(a) a person has succeeded title to the interest in the licence, by substituting the name of the successor in title; or
(b) the name of a financial service provider has changed, by substituting the name so changed.
(2) The Bank shall, before amending a licence as specified in sub-section (1), notify the public by publishing a notice in the Gazette and in a daily newspaper of general circulation or other media in Zambia.
(1) A licensee that intends to surrender a licence shall notify the Bank, in writing, in the prescribed manner and form of its intention to do so.
(2) A licensee shall agree with the Bank on the terms and conditions with respect to a surrender of a licence, with particular reference to any benefit obtained or liability incurred due to the licence or the requirements of any other relevant law.
(3) Where a licence is surrendered, in accordance with sub-section (1), and the Bank is satisfied that all liabilities are or will be satisfied and the requirements of the Companies Act, or the Corporate Insolvency Act, where applicable, have or shall be complied with, the Bank shall cancel the licence.
(4) Where the Bank cancels a licence surrendered in accordance with this section, section 17(7), (8) and (9), shall apply, with the necessary modifications.
17. Suspension or cancellation of licence
(1) Subject to this Act, the Bank may suspend or cancel a licence if the financial service provider—
(a) obtained the licence by fraud or submitted false information or statements;
(b) contravenes this Act or any other relevant written law;
(c) breaches any term or condition of the licence;
(d) effects a corporate restructuring transaction without the prior written approval of the Bank;
(e) fails to comply with a decision, rule or regulatory statement made by the Bank in accordance with this Act;
(f) fails to commence the business to which the licence relates within a period of 12 months from the date of grant of the licence;
(g) enters into receivership or liquidation or takes any action for voluntary winding-up or dissolution;
(h) enters into any scheme or arrangement, other than a corporate restructuring transaction;
(i) ceases to conduct the business authorised by the licence;
(j) is the subject of an order made by the Court or tribunal for its compulsory winding-up or dissolution;
(k) ceases to fulfil the requirements specified in or by this Act; or
(l) engages in unsafe and unsound practices.
(2) The Bank shall, before suspending or cancelling a licence, in accordance with sub-section (1), give written notice, in the prescribed manner and form, to the financial service provider, of its intention to suspend or cancel the licence and shall—
(a) give reasons for the intended suspension or cancellation; and
(b) require the licensee to show cause, within a period of 30 days, why the licence should not be suspended or cancelled.
(3) Where a financial service provider takes remedial measures to the satisfaction of the Bank, within the period referred to in sub-section (2), the Bank shall not suspend or cancel the licence.
(4) The Bank shall, in making its final determination on the suspension or cancellation of a licence, consider the submissions made by the financial service provider, in accordance with sub-section (2), and shall consider any remedial measures taken in accordance with sub-section (3).
(5) The Bank may suspend or cancel a licence if the financial service provider, after being notified in accordance with sub-section (2), fails to show cause why the licence should not be suspended or cancelled or does not take any remedial measures to the satisfaction of the Bank within the specified period.
(6) Where a licence has been suspended, in accordance with this section, a financial service provider shall, for the period of the suspension of the licence, cease to be entitled to the rights and benefits conferred in accordance with the licence and this Act.
(7) Where a licence is cancelled, a financial service provider shall—
(a) cease to be entitled to the rights and benefits, conferred in accordance with the licence and this Act, with effect from the date of the cancellation;
(b) surrender to the Bank, each copy of the licence in the possession of the financial service provider; and
(c) take down any licence on display in every place of business of the financial service provider.
(8) The Bank shall, where it suspends or cancels a licence, in accordance with this section—
(a) publish a notice of the suspension or cancellation, in the prescribed manner and form, in the Gazette and in a daily newspaper or other media of general circulation in Zambia; and
(b) take any additional steps necessary to inform the public of the suspension or cancellation of the licence.
(9) A financial service provider whose licence is cancelled shall not, from the date it receives a notice of the cancellation from the Bank—
(a) enter into a new contract relating to the banking business, financial business or provision of financial services; or
(b) renew or vary a contract relating to the banking business, financial business or provision of financial services.
(1) A financial service provider that has lost a licence shall inform the Bank, within seven days of the loss, and apply to the Bank for a duplicate licence, in the prescribed manner and form, and pay the prescribed fee.
(2) A financial service provider whose licence is defaced or damaged shall apply to the Bank for a duplicate licence, in the prescribed manner and form, and pay the prescribed fee.
(3) The Bank shall, where an application made in accordance with sub-section (1) or (2) meets the requirements of this Act, issue a duplicate licence on payment by the applicant of the prescribed fee.
19. Opening branches, subsidiaries and other establishments
(1) A financial service provider shall not open a branch, subsidiary or other establishment without the prior written approval of the Bank.
(2) A financial service provider that intends to open a branch, subsidiary or other establishment shall apply to the Bank for approval in the prescribed manner and form and pay the prescribed fee.
(3) A bank or financial institution shall notify the Bank of its intention to close a branch, within 60 days before the closure.
(4) A financial business shall notify the Bank of its intention to close a branch, within 30 days before the closure.
The Bank shall prescribe the licensing and regulatory requirements for a representative office.
21. Register of financial service providers
(1) The Bank shall establish and maintain a Register of financial service providers in which shall be entered the—
(a) names, addresses and other particulars of the licensees; and
(b) names and particulars of persons whose licences are rejected or cancelled.
(2) The Register shall be open for public inspection during normal operating hours of the Bank.
[S 21(2) subs by s 4 of Act 7 of 2020.]
(3) The Bank may maintain a Register in an electronic form or any other form determined by the Bank.
[S 21(3) ins by s 4 of Act 7 of 2020.]
22. Publication of financial service providers
The Registrar shall publish, annually, in the Gazette—
(a) the licences issued to, and the names of, the financial service providers; and
(b) a list of licences suspended or cancelled in accordance with this Act.
23. Appointment of Registrar and Deputy Registrars
(1) The Bank shall, in writing, and subject to such terms and conditions as it may determine, appoint a suitably qualified officer of the Bank as Registrar.
(2) The Bank may designate officers of the Bank as Deputy Registrars who shall be subject to the control and direction of the Registrar and shall exercise the powers and perform the functions directed or delegated by the Registrar.
(3) The Registrar and Deputy Registrars, specified in sub-sections (1) and (2), shall each hold office for a period of five years and shall be eligible for re-appointment for a further period of five years.
The Bank may authorise a financial service provider to provide banking and financial services without relying on physical branches in order to promote accessibility by unserved areas to banking and financial services.
PART III
OWNERSHIP AND CONTROL OF FINANCIAL SERVICE PROVIDERS
(1) Subject to sub-section (2), a person shall not without prior approval of the Bank, in writing—
(a) acquire any beneficial interest in the voting shares of a financial service provider; or
(b) enter into any voting arrangement or other agreement that would enable that person or another person to control more than 25 per cent of the total votes that could be cast at a meeting of the financial service provider.
(2) Subject to section 27(3), where a person intends to—
(a) acquire beneficial interest in the voting shares of a financial service provider; or
(b) enter into a voting arrangement trust or other agreement,
that would enable that person to control more than 25 per cent of the total votes that may be cast on a resolution at a meeting of the financial service provider, the financial service provider shall obtain the prior written approval of the Bank.
(3) Where a financial service provider referred to in sub-section (1) is publicly traded, the financial service provider shall notify the Bank as soon as it becomes aware that a person has become a significant shareholder in the financial service provider.
(4) The Bank shall, within 60 days of receipt of a request for approval as specified in sub-section (2), grant or reject the request.
(5) Where the Bank rejects a request for approval, made in accordance with sub-section (2), the Bank shall inform the requester, in writing, of the reasons for the rejection within 14 days of such rejection.
(6) Sub-section (1) does not apply to a company which has more than 51 per cent of its shares publicly traded on a securities exchange, whether within Zambia or outside Zambia, acceptable to the Bank.
(7) Despite sub-section (1), the Bank may prescribe a different limit of voting control for financial businesses.
(8) The Bank may suspend the exercise of voting rights that are in excess of the limit of voting control specified in sub-section (1) or prescribed in accordance with sub-section (7).
(9) A beneficial owner shall, in person or by proxy, exercise only the voting rights on a voting share that is registered, in the name of the beneficial owner, on the share register of a financial service provider.
(10) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding four hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both.
(1) Where a financial service provider contravenes section 25, the Bank shall, on receiving notification, from any person, of the contravention, direct the financial service provider, in the prescribed manner and form, to dispose of the beneficial interest in the voting shares or terminate or modify the voting trust or other arrangement to reduce the person’s control to the extent permissible by or in accordance with this Act.
(2) A financial service provider directed to dispose of a beneficial interest in voting shares, or terminate or modify the voting trust or other arrangement, shall do so within 30 days of receiving the direction from the Bank.
(3) The Bank may, for purposes of ensuring compliance with sub-section (1), direct a financial service provider to submit to the Bank a plan of action with regard to the reduction of control and the Bank may give directions, in writing, for the implementation of the plan.
(1) A beneficial owner shall not own shares in the capital of, or acquire or maintain control in, more than one financial service provider, without the prior written approval of the Bank.
(2) A nominee may hold shares in a financial service provider only if the beneficial owner is identifiable and complies with this Act.
(3) A beneficial owner shall not transfer to another person any shares or other form of ownership in a financial service provider that constitutes a significant shareholding, without the prior written approval of the Bank.
(4) This section does not prevent a person from acquiring all the voting shares in the capital of a financial service provider for the purpose of implementing a corporate restructuring transaction in accordance with this Act, except that the person shall comply with section 25 at the completion of the corporate restructuring transaction.
(5) A request for the written approval of the Bank, made for purposes of this section, shall be made in the prescribed manner and form.
(6) A beneficial owner of the shares of a financial service provider shall not charge, use as collateral or encumber those shares.
(7) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding four hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both.
28. Prohibition of ownership of shares by trusts
A trust or person that controls another person’s property or money under an arrangement or agreement, shall not own shares in a financial service provider, unless the beneficial owner and persons that control the trust, arrangement or agreement are identifiable and comply with this Act and any other relevant written law.
29. Corporate restructuring transactions
(1) Subject to section 30, a financial service provider may effect a corporate restructuring transaction with another company, that is not a financial service provider, if the transaction is in furtherance of the business of the financial service provider.
(2) A bank or financial institution may effect a corporate restructuring transaction with a financial business if the restructured company shall be a bank or financial institution.
30. Requirements for corporate restructuring transaction
(1) Despite any other written law, a financial service provider shall not effect a corporate restructuring transaction without the prior written approval of the Bank.
(2) A financial service provider shall apply, in the prescribed manner and form, to the Bank for approval to effect a corporate restructuring transaction, in accordance with section 29, specifying—
(a) the name of each financial service provider or company involved in the proposed corporate restructuring transaction;
(b) a statement of the nature of the transaction proposed to be entered into;
(c) the material documents intended to evidence or implement the corporate restructuring transaction; and
(d) such other information as the Bank may require.
(3) The Bank shall, in considering an application for approval of a corporate restructuring transaction, have regard to the—
(a) capital adequacy of each applicant in relation to the transaction;
(b) general financial condition, resources and history of each applicant;
(c) character and experience of the directors and persons concerned in the management of the company concerned;
(d) prospects of profitability of the company’s operation, if the transaction is approved;
(e) probable effect of the transaction on competition in the financial sector;
(f) requirements of the Competition and Consumer Protection Act; and
(g) transparency of the legal, financial, operational, managerial, governance and ownership structure of the proposed restructured financial service provider.
(4) The Bank shall, where it grants approval for a corporate restructuring transaction, specify a date on which the corporate restructuring transaction shall take effect.
(5) The Bank shall, where it rejects an application for approval for a corporate restructuring transaction, inform the applicant within seven days of the decision and give reasons for the rejection.
31. Effect of corporate restructuring transaction
(1) In this section—
"new entity" means a financial service provider formed by a corporate restructuring transaction; and
"old entity" means the financial service provider existing prior to the corporate restructuring transaction.
(2) Where a corporate restructuring transaction takes effect in accordance with this Act—
(a) the assets and liabilities of the old entity or, in the case of a transfer of assets and liabilities, the assets and liabilities agreed to be transferred, shall vest in the new entity;
(b) the new entity shall submit a written statement to the Bank, confirming that the assets and liabilities of the old entity have been transferred in accordance with the approved restructuring proposal;
(c) the new entity shall have the same rights and be subject to the same obligations as were, immediately before the transaction took effect, binding on the old entity or, in the case of a transfer of assets and liabilities, the same rights and obligations as were applicable to the old entity with respect to the assets and liabilities so transferred;
(d) the agreements, appointments, transactions and documents relating to transactions of the old entity, that were valid immediately before the corporate restructuring transaction took effect, shall continue to be valid and shall be deemed to have been entered into with the new entity; and
(e) a mortgage, bond, pledge, guarantee or other instrument relating to the corporate restructuring transaction given to secure past, present and future advances, facilities or services by the old entity, shall be deemed to be a mortgage, bond, pledge, guarantee or instrument given to, or in favour of, the new entity.
(3) The Registrar of Companies and a Registrar of Lands and Deeds shall make endorsements and alterations in the respective registers, so as to record the transfer of the property and any rights or liabilities in the property arising from a corporate restructuring transaction where the Registrar of Companies and the Registrar of Lands and Deeds are satisfied that—
(a) the Bank has approved the corporate restructuring transaction; and
(b) the transaction has been duly effected through a deed, instrument, mortgage or other document.
(4) This section does not affect the rights of any creditor, except to the extent specified in this section and the documents relating to the corporate restructuring transaction.
PART IV
CORPORATE GOVERNANCE
32. Responsibilities of Directors
(1) A board shall be responsible for the duties and functions specified in the Companies Act, and this Act.
(2) A board shall perform the following functions—
(a) formulation of policies for the financial service provider;
(b) ensuring corporate governance and business performance of the financial service provider;
(c) directing the affairs and business operations of the financial service provider;
(d) ensuring that the business of the financial service provider is carried on in compliance with all applicable laws and regulations and is conducive to safe and sound practices;
(e) constituting committees of the board as prescribed;
(f) reporting to the shareholders, at an annual general meeting, on the internal controls and systems and information management systems of the financial service provider;
(g) reporting to the Bank on any material changes in the activities, structure and condition of the financial service provider; and
(h) reporting to the Bank on matters that may affect the suitability of shareholders, directors and senior managers.
(1) Despite the provisions of this Act, the Companies Act, or the articles of association, the Bank may—
(a) direct a board to meet within three days at such place in Zambia as the directive shall specify;
(b) request a board to consider and decide on such items relating to the financial service provider as the Bank may direct; and
(c) appoint an observer to a meeting of a board concerned in accordance with this section.
(2) Where a meeting is convened, in accordance with sub-section (1)(a)—
(a) the quorum for the meeting shall be three directors or one-third of the total number of directors, whichever is the greater;
(b) decisions shall be taken by a simple majority of the directors present; and
(c) any decision taken in accordance with paragraph (b) shall be binding on the financial service provider.
(3) The Bank shall, where a board fails to convene a meeting as directed by the Bank in accordance with sub-section (1), take appropriate action to safeguard the integrity of the financial system, the interests of the financial service provider and its customers.
34. Qualifications of directors, chief executive officers, chief financial officers
(1) A person shall not be elected or appointed as a director, chief executive officer or chief financial officer of a financial service provider without the prior written approval of the Bank.
(2) Despite anything to the contrary in the Companies Act, or any other written law, a person is not qualified for election or appointment as a director or senior officer if that person—
(a) is not a fit and proper person to hold the relevant office in accordance with this Act;
(b) is below the age of 21 years;
(c) has been adjudged bankrupt by a competent court or has made an arrangement or composition with that person’s creditors, in Zambia or elsewhere;
(d) has been convicted of an offence involving fraud or dishonesty;
(e) has a mental disability that makes the person incapable of performing the functions of the office;
(f) has been suspended or removed from office in accordance with this Act;
(g) has been a director, member, chief executive officer, chief financial officer, manager or senior officer of a company that has—
(i) been adjudged insolvent;
(ii) entered into a composition with creditors; or
(iii) gone into liquidation or has entered into any other arrangement with creditors in Zambia or elsewhere;
(h) has been removed by a competent court, in Zambia or elsewhere, from an office of trust on account of misconduct or breach of that trust; or
(i) is an expatriate who does not meet such additional requirements as the Bank may prescribe by rules issued in accordance with this Act.
(3) A person shall not be a director of more than one financial service provider without the prior written approval of the Bank.
(4) A person who is a director or senior officer in a financial service provider, whose licence is cancelled in accordance with this Act, shall not, without the prior written approval of the Bank, be elected or appointed as a director or senior officer of another financial service provider.
(5) A person that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding four hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both.
35. Non-executive directors to be in majority
(1) A board of a bank or financial institution may be constituted of executive and non-executive directors, except that the non-executive directors shall be in the majority.
(2) The Minister may, on the recommendation of the Bank, by statutory instrument, provide for the application of sub-section (1) to a financial business.
36. Reporting obligations of Board and directors
(1) The Board and each director individually shall immediately report in writing to the Bank if they have reason to believe that the financial service provider—
(a) may not be able to conduct its business as a going concern;
(b) appears to be or is likely in the near future to be unable to meet all or any of its obligations as they fall due; and
(c) does not or may not be able to meet its capital requirements as prescribed in this Act.
(2) Where the Board or a director fails, omits or neglects to report to the Bank any matter required to be reported under sub-section (1), the Bank may suspend or remove the Board or director.
(3) Subject to section 165, a person who contravenes sub-section (1) commits an offence and is liable upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both.
37. Conduct of directors, chief executive officers, chief financial officers and managers
(1) A director, chief executive officer, chief financial officer or manager concerned in the management of a financial service provider, in exercising the powers and discharging the duties of office, shall ensure compliance with this Act, regulations and regulatory statements of the Bank.
(2) A person who contravenes sub-section (1) commits an offence and is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both.
(1) A director shall declare, annually, in writing, to the board the names and addresses of the director’s associates and the material interests of the director.
(2) A director or senior officer who—
(a) is a party to, or has a direct or indirect interest in, a contract or proposed contract with the financial service provider or in the granting of an advance by the financial service provider; or
(b) has a material relationship with a party or prospective party to a contract or a proposed contract with the financial service provider,
shall disclose, in writing, to the financial service provider, the nature and extent of the relationship.
(3) A disclosure of interest, to be made in accordance with this section, shall be made at a meeting of the board at which the question of entering into the contract or granting the advance is first considered, or if the director or senior officer is not, at the date of that meeting, interested in the proposed contract or advance, at a board meeting held immediately after the director or senior officer becomes interested.
(4) A director or senior officer with an interest or material relationship with a party to a contract, shall not participate in a meeting of the board at which the contract concerned is discussed and the director shall refrain from voting on any matter related to the contract, except that a departure of a director from the meeting, shall not disqualify the director for purposes of constituting a quorum.
(5) A director or senior officer shall not be required to make a declaration or give a notice in person, at a meeting of the board, if the director or senior officer delivers the notice and disclosure of interest to each director, at least seven days before the meeting.
(6) A director or senior officer who fails to comply with this section commits an offence and is liable, upon conviction, to a fine not exceeding seven thousand penalty units for each day that the offence continues.
(7) Where a director or senior officer fails to disclose an interest or material relationship as specified in this section, the Court may, on the application of a financial service provider, shareholder or the Bank—
(a) set aside the contract on such terms as it may determine; and
(b) suspend the director or senior officer from office.
(8) For purposes of this section—
(a) persons have a material relationship if they are associated persons or a transaction relates to or is connected with the wealth, business or family interests of the person; or
(b) a person has a material interest in an entity where the person owns, directly or indirectly, more than 10 per cent of any class of voting shares or is a director, proprietor or partner in the entity.
39. False statement and obstruction of examinations
(1) A director, senior officer, or other employee, agent, accountant or adviser of a financial service provider shall not—
(a) negligently or with intent to deceive, make a false or misleading statement or entry or omit to make a statement or entry in any book, account, report or statement of the financial service provider; or
(b) obstruct or attempt to obstruct—
(i) the proper performance by an auditor of the auditor’s duties in accordance with this Act, the Companies Act, or any other relevant law; or
(ii) a lawful inspection of the financial service provider by a duly authorised inspector appointed by the Bank.
(2) A person who contravenes sub-section (1) commits an offence and is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding one year, or to both.
40. Suspension or dismissal of directors and senior officers by Bank and removal of shareholders
(1) The Bank may, by order in writing, suspend from office for a period not exceeding six months, a director or senior officer who fails to take reasonable steps to secure compliance by the financial service provider with the requirements of the Act, regulations, rules or regulatory statements made in accordance with this Act or any other relevant written law.
(2) The Bank may, at any time before the expiry of the period referred to in sub-section (1), apply to the Court for an order extending the suspension on good cause shown or an order dismissing a director or senior officer and the Court may, by order—
(a) suspend from office the director or senior officer concerned for such period as it considers appropriate in the circumstances; or
(b) dismiss the director or senior officer from office.
(3) A director or senior officer who performs the functions of office during the period of suspension, or after being dismissed from office, commits an offence and is liable, upon conviction, to a fine not exceeding three hundred thousand penalty units or imprisonment for a term not exceeding three years, or to both.
(4) A significant shareholder shall cease to be a shareholder in a financial service provider if the Bank determines, on evidential grounds, that the significant shareholder is not a fit and proper person to continue holding shares in financial service provider.
(5) The Bank shall, upon application to the Court, dispose of any shareholding interest, of any person that ceases to be a shareholder in accordance with sub-section (4), in a manner and to persons ordered by the Court, subject to the payment of compensation, where applicable.
41. Fit and proper requirements
(1) The Bank may prescribe fit and proper requirements for a shareholder, director or senior officer, which may include criteria relating to—
(a) probity, personal integrity and reputation;
(b) competency and capability; and
(c) financial integrity.
(2) The Bank may remove a shareholder, director or senior officer from office, if it considers that the person, on evidential grounds, has breached the requirements prescribed in sub-section (1).
(1) The Bank shall, by rules issued in accordance with this Act, prescribe the contents of a corporate governance charter to be adopted by a financial service provider.
(2) A board shall develop its own corporate governance charter based on the contents prescribed in accordance with sub-section (1).
(3) The Bank shall, by rules issued in accordance with this Act, prescribe—
(a) the number of directors to be appointed for a board of a bank or financial institution;
(b) the number and type of committees of a board to be constituted and their functions;
(c) mandatory conditions under which a senior officer or other employee concerned with the management or financial affairs of a financial service provider shall be removed from office by a board; and
(d) the reporting requirements relating to compliance of this Act, the Companies Act, and rules and regulations issued in accordance with this Act.
PART V
BUSINESS OPERATIONS
43. Principal administrative office
(1) A financial service provider shall establish and maintain a principal administrative office in Zambia and shall inform the Bank, in the prescribed manner and form, of the location of the principal administrative office.
(2) A financial service provider shall not change the location of its principal administrative office without the prior written approval of the Bank.
(3) A financial service provider that intends to change the location of its principal administrative office shall, in the prescribed manner and form, and at least 60 days before the proposed change, apply to the Bank for the approval of the proposed change.
(4) The Bank shall, when considering an application made in accordance with sub-section (3), take into consideration the suitability of the proposed location.
(5) Where the Bank rejects an application made in accordance with sub-section (3), the Bank shall inform the financial service provider, in writing, within seven days of making the decision and give reasons for the rejection.
44. Use and alteration of name
(1) A financial service provider shall use its name—
(a) on letterheads, correspondence, official documents, advertisements or other communication published or issued by the financial service provider; and
(b) in written contracts to which a financial service provider is a party.
(2) A financial service provider shall not, without the prior written approval of the Bank, alter its name or use or refer to itself for any business purpose by any other name or an abbreviation of the name.
(3) A financial service provider may, with the written approval of the Bank, use its name with the name of a business or undertaking with which it has had a corporate restructuring transaction or, in the case of a change of name, by the subsequent name registered.
(1) A financial service provider shall remain open for business with the public during the hours prescribed by the Bank or such other hours as the Bank may authorise.
(2) The Bank may, on application by a financial service provider, authorise the financial service provider to be closed on any business day subject to such terms and conditions as the Bank may determine.
(1) The Minister may, on the recommendation of the Bank, by statutory instrument, prescribe a bank holiday.
(2) Where an obligation to be discharged by a bank or financial institution falls on a bank holiday, it shall be discharged on the next business day following the bank holiday.
(3) In this section, "bank holiday" means a day on which a bank or financial institution, except a bank’s or financial institution’s branch at an airport or border post, is not open for business with the public, whether or not that day is a public holiday.
47. Records to be registered and maintained
(1) A financial service provider shall prepare and maintain records which shall contain—
(a) the articles of association and amendments to the articles of association;
(b) a register of shareholders and the number of shares registered in the name of each shareholder;
(c) the minutes of meetings and resolutions of the board;
(d) the minutes of meetings and resolutions of the shareholders;
(e) the business correspondence, with supporting accounting records, showing the state of its business affairs and transactions and the financial position of the financial service provider;
(f) for each customer of the financial service provider, records showing, particulars of transactions with, or for the account of, the customer and the balance owing to or by the customer on a daily basis; and
(g) such other records required to be prepared and maintained in accordance with this Act or as may be prescribed by the Bank.
(2) The records, referred to in sub-section (1)(a), (b), (c), (d) and (e) shall be kept and maintained at the principal administrative office of the financial service provider.
(3) The records, referred to in sub-section (1), shall be open for inspection at reasonable times by—
(a) the directors; and
(b) except for records specified in sub-section (1)(c) and (f), the shareholders and creditors, or their personal representatives, as provided in this Act and any other relevant law.
(1) A financial service provider shall cause to be established and maintained, at the principal administrative office, credit documentation and other information relating to the business of the financial service provider with customers and other persons, as the Bank may determine.
(2) In this section, "credit documentation" means the following documents attaching or relating to a contract entered into by a financial service provider with any other person for the provision of a banking or financial service or in respect of a banking or financial service performed or to be performed by the financial service provider—
(a) the current financial statements showing indebtedness of a borrower to the financial service provider and where the debt is guaranteed, the details of the guarantor;
(b) a description of the collateral over which the financial service provider has a mortgage or charge as security for the settlement of a credit facility;
(c) a statement of the terms of the credit, including the principal amount, rate of interest, schedule of repayments and the borrower’s objective or purpose for borrowing; and
(d) documents evidencing the assessment and approval of the credit facility by the financial service provider.
A register or record that a financial service provider is required to establish and maintain in accordance with this Act shall be—
(a) bound in looseleaf or photographic film form;
(b) entered or recorded by any system of mechanical or electronic data processing or any other device or process capable of reproducing the information in intelligible written form within a reasonable time; and
(c) if kept in any one form, be capable of conversion to any other form.
(1) A financial service provider shall retain a register or record for a period of 10 years.
(2) The Bank may require a financial service provider to retain records for a longer period than specified in sub-section (1).
(1) A financial service provider shall, with respect to a register or record—
(a) prevent loss or unauthorised destruction;
(b) prevent falsification of entries;
(c) facilitate the detection and correction of inaccuracies; and
(d) prevent the use or access of information by an unauthorised person.
(2) A financial service provider may destroy a register or record, kept in accordance with this Act, at any time after the register or record has been converted to another form.
(3) A person shall not—
(a) destroy, alter, mutilate or falsify any book, document, valuable security or account, which belongs to a financial service provider or customer, or any entry in such a book, document, or account, or be privy to any such act;
(b) make or be privy to the making of a false entry in a book, document or account; or
(c) omit or be privy to an omission of a material particular from a book, document or account.
(4) A person who contravenes sub-section (3) commits an offence and is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both.
PART VI
REGULATORY AND SUPERVISORY POWER BANK
[Heading subs by s 5 of Act 7 of 2020.]
52. Minimum capital requirements
(1) The Bank shall prescribe the minimum paid-up capital, minimum common equity tier one, minimum primary capital and minimum regulatory capital requirements for financial service providers.
(2) A financial service provider shall compute its regulatory capital in the manner prescribed by the Bank.
(3) A financial service provider shall commence operations with the minimum paid-up capital prescribed by the Bank.
(4) A financial service provider shall maintain the minimum common equity tier one, primary capital and regulatory capital ratios prescribed by the Bank.
(5) Despite sub-section (4), the Bank may require a bank or financial institution to maintain common equity tier one and primary and regulatory capital ratios, in excess of the prescribed amounts, where a bank or financial institution—
(a) has been operating for less than three years;
(b) has been or is expected to have losses resulting in capital deficiencies;
(c) has significant exposure to risk, whether credit, concentration of credit, interest risk, liquidity, operational or any other serious weaknesses in the quality of its assets or earnings;
(d) has a high or severe volume of poor quality assets;
(e) is growing rapidly, internally or through acquisitions;
(f) may be adversely affected by the activities or conditions of its holding company, subsidiary or associates;
(g) has deficiencies in its ownership or management, shareholding structure, composition, qualifications of its directors or senior officers or risk management policies and procedures; or
(h) may be adversely exposed in any other circumstance determined or prescribed by the Bank.
(6) A financial service provider shall not issue any share in its capital or other security other than a bonus share or a share in lieu of dividend or other prescribed security unless it receives the full face value thereof in Zambian Kwacha.
53. Capital conservation buffer
(1) A financial service provider shall build up a capital conservation buffer.
(2) The capital conservation buffer shall be in the form of common equity tier one as prescribed by the Bank.
(3) The Bank may prescribe different buffer requirements for different categories of financial service providers.
(4) A financial service provider shall not declare, credit or pay any dividends, or make other discretionary payments or make any transfer from retained earnings, if doing so would result in failure to provide for, or maintain, the required capital conservation buffer.
54. Counter cyclical capital buffer
(1) Subject to sub-section (3), the Bank may require banks and financial institutions to maintain a counter cyclical capital buffer in their risk weighted assets and forms of common equity capital tier one.
(2) Where the Bank adjusts the counter cyclical capital buffer, the Bank shall announce the decision at least 30 days in advance of the effective date, except that a decision to decrease the level of the counter cyclical capital buffer shall take effect immediately.
(3) A counter cyclical capital buffer shall not be required where the Bank determines that the capital released shall help to absorb losses in a bank or financial institution that pose a risk to financial stability.
55. Restriction on payment of dividends
(1) A bank or financial institution that intends to declare a dividend shall apply to the Bank, for approval of the amount proposed to be declared.
(2) The Bank may, having regard to the impact on the capital adequacy, capital conservation buffer and the risk profile of the applicant—
(a) approve the amount of dividend intended to be declared;
(b) approve a reduced amount of dividend; or
(c) prohibit the payment of any dividend.
The Bank may require banks and financial institutions to maintain common equity tier one, to total on and off balance sheet assets, at a ratio prescribed by the Bank.
(1) A bank or financial institution shall maintain adequate and appropriate forms of liquidity as prescribed by the Bank.
(2) A bank or financial institution shall not—
(a) hold liquid assets, within the bank or financial institution, of less than the percentage level or proportion prescribed by the Bank; or
(b) grant or permit, for the period during which liquid assets are less than the percentage level or proportion prescribed by the Bank, an increase in its outstanding loans, overdrafts or investments.
(3) A bank or financial institution shall, within seven days from the date of a request on the liquidity position of the bank or financial institution by the Bank, provide the information to the Bank.
(4) The Bank may impose, on a bank or financial institution that fails to comply with this section, an administrative penalty on the amount of deficiency, at a rate of two or more percentage points above the annual interest rate prevailing in the most recent 91 day treasury bill auction.
58. Constraints on contracts with associated person
(1) A financial service provider may enter into a contract with an associated person if the—
(a) board approves the contract in advance, and the contract is on terms that are not less favourable to the financial service provider than the terms of similar contracts entered into by the financial service provider with persons who are not associated;
(b) contract is for a nominal sum or of a class or type exempted by the Bank from the operation of this section; or
(c) terms of the contract are in conformity with this Act.
59. Examination of financial service providers
(1) The Bank may cause an examination to be made of a financial service provider in order to determine whether the financial service provider is—
(a) in a sound financial condition; and
(b) complying with this Act, and any other relevant written law.
(2) Despite any other written law, the Bank may access the business of a financial service provider and examine—
(a) oral and documented information including information in computers, books, minutes, accounts and vouchers;
(b) cash and securities; and
(c) any other thing in the possession, custody or under the control of a financial service provider or its affiliate.
(3) The Bank shall, after the completion of an examination undertaken in accordance with this section, submit a report on the examination to the chairperson of the board concerned and shall require the—
(a) chairperson of the board to submit the report to a meeting of the board; and
(b) financial service provider to provide satisfactory explanations, in writing, on actions to be taken on the issues raised in the report.
(4) A report submitted by the Bank, in accordance with sub-section (3), shall be confidential and a director, senior officer or other employee of a financial service provider and any person who, by reason of the person’s capacity or office, has access to the report shall not, without the prior written approval of the Bank, while holding that office, or after the termination of employment, communicate the report or any part of the report to any person other than a director, a senior officer or other employee of that financial service provider.
(5) The Bank may, where it determines that an examination undertaken in accordance with this section shows that the business of a financial service provider is conducted in a manner detrimental to the interests of the financial service provider or its shareholders—
(a) require the financial service provider to take such remedial measures as the Bank may direct; or
(b) appoint a person who is competent to advise the financial service provider on the necessary remedial measures to be taken in accordance with paragraph (a).
(6) A person who, in good faith, provides information or facilitates an examination of a financial service provider, in compliance with this section, shall be indemnified against any claim or sanction as a consequence of such action.
(7) A person who contravenes sub-section (3), (4) or (5) commits an offence is liable, upon conviction, to a fine not exceeding one hundred thousand penalty units, or to imprisonment for a term not exceeding one year, or to both.
(1) A bank or financial institution shall deliver to the Bank, in the form and within the period prescribed by the Bank—
(a) a statement showing assets and liabilities as at the close of the last business day of that month;
(b) the amount of its regulatory capital and reserve funds and the ratio that the amount of its liabilities to the public bears to the amount of its regulatory capital and reserve funds;
(c) a statement showing the loans that are performing;
(d) a statement showing the loans that are nonperforming, loans that have been restructured including the terms of restructuring as the case may be; and
(e) such other statements, further details or evidence concerning its operations, financial condition and resources as may be prescribed by the Bank.
(2) The Bank may require a financial business to provide periodic reports showing information on its operations, financial condition and resources as the Bank may prescribe.
(1) The Bank shall, where it considers it necessary for the safety and soundness of the financial service provider, safety of depositors, or to determine whether this Act is being complied with, require, in writing, an affiliate, associate, holding or subsidiary company, or a person that controls the financial service provider, to provide the Bank or its appointed agent such information or documents as may be necessary, including the financial statements and other financial records of that affiliate, associate, holding or subsidiary company or person in control, within the period specified in the notice.
(2) The Bank may appoint a competent person to undertake an examination of the operations and affairs of an affiliate, associate, holding or subsidiary company of a financial service provider or any person that controls a financial service provider, in order to determine whether the operations and affairs of the affiliate, associate, holding or subsidiary company or the person in control are detrimental to the safety and soundness of the financial service provider.
(3) A person who fails, refuses, omits or neglects to provide information requested in sub-section (1) or (2) commits an offence is liable, upon conviction, for each day during which the contravention continues, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both.
(4) A significant shareholder or director who fails, refuses, omits or neglects to provide information requested for in accordance with sub-section (1) or (2) or is a party to the failure, refusal, omission or neglect, ceases to be a fit and proper person and shall not be or remain a significant shareholder or director in the financial service provider.
62. Affiliates and cross-border supervision
(1) The Bank may exercise its authority over an affiliate of a financial service provider where the Bank determines that it is necessary to implement supervision on a consolidated basis or to effectively supervise the financial service provider and the risks to which it is subjected.
(2) The Bank may, in order to ensure effective supervision of a financial service provider that operates both within and outside Zambia, enter into arrangements for sharing supervisory information on a reciprocal basis with the competent supervisory authorities outside Zambia.
62A. Anti-money laundering and counter financing of terrorism supervision
The Bank may exercise its authority over a financial service provider where the Bank considers that it is necessary to implement supervision for the purposes of the prevention and combating of money laundering and financing of terrorism or proliferation or any other serious offence.
[S 62A ins by s 6 of Act 7 of 2020.]
63. Unsafe and unsound practices
(1) The Bank may prescribe conduct or actions which constitute unsafe or unsound practices.
(2) Where the Bank determines that a financial service provider is committing or pursuing an act or course of conduct that is unsafe or unsound, the Bank may enter into a written agreement, within the time, form and content as directed by the Bank, with the financial service provider or its board to establish a programme of action to counteract the unsafe or unsound practice and to establish or maintain safe and sound practices in the conduct of the business of the financial service provider.
(3) Where the Bank is unable to agree with a financial service provider, as provided in sub-section (2), or where the Bank considers that the need for prompt action makes the negotiating of an agreement impractical, the Bank may direct the financial service provider, board or chief executive officer to cease or refrain from doing the act, pursuing the course of conduct or performing any act to rectify the situation.
(4) The Bank may, where it determines that a financial service provider is committing or pursuing an act or course of conduct that is unsafe or unsound—
(a) direct the financial service provider to refrain from adopting or pursuing a particular course of action or to restrict the scope of its business in a particular way;
(b) impose a limitation on the bank’s acceptance of deposits, payment of interest on deposits, granting of credit, making of investments or payment of dividends;
(c) prohibit the bank or financial institution from soliciting deposits or paying interest on deposits made by or from specified persons or classes of persons;
(d) prohibit the financial service provider from entering into any other transaction or class of transactions or from commencing or continuing an activity that it is permitted in this Act; or
(e) require the suspension or removal from office of any director, senior officer or other person.
(5) A direction given in accordance with this section shall be given by written notice to the financial service provider or person concerned and may in like manner be varied or revoked.
(6) A direction given, in accordance with this section, shall be effective immediately and shall remain in effect in accordance with its terms unless discontinued on appeal.
(7) A person acting in contravention of an agreement made, or direction given, in accordance with this section, commits an offence and is liable, upon conviction, to a penalty not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding five years, or to both.
(8) A person who carries out any unsafe or unsound practice, contrary to the provisions of this Act or rules issued in accordance with this Act, commits an offence and is liable, upon conviction, to a fine not exceeding three hundred thousand penalty units or to imprisonment for a term not exceeding three years, or to both.
(1) The Bank shall take supervisory action against a financial service provider where—
(a) the financial service provider fails to comply with this Act and any rule or regulatory statement issued in accordance with this Act or any other applicable law;
(b) the financial service provider refuses to permit an examination or obstructs an examination from being made as provided in or in accordance with this Act;
(c) an examination instituted in accordance with this Act shows that a financial service provider—
(i) conducts business in breach of any relevant written law or engages in conduct that is unsafe or unsound;
(ii) is unable, or is likely to become unable, to continue its operations in the ordinary course of its business;
(iii) has capital which is less than the prescribed minimum; or
(iv) is insolvent.
(2) Without prejudice to any other course of action taken by the Bank, the supervisory action that the Bank may take as specified in sub-section (1), includes—
(a) making directions, in writing, that the financial service provider takes remedial action to comply with any rule or regulatory statement;
(b) issuing a regulatory statement or measures to be taken to improve the management, financial soundness or business methods of a financial service provider;
(c) requiring the board or senior officers to execute an agreement on implementation of a regulatory statement issued in accordance with paragraphs (a) and (b);
(d) performing or appointing an agent to perform a special examination of the financial service provider to determine the financial condition of the financial service provider at the cost of the financial service provider; or
(e) taking possession of a financial service provider.
(3) Where a financial service provider fails, refuses or neglects to comply with a regulatory statement issued or an agreement made, in accordance with sub-section (1), the Bank may do any of the following—
(a) issue a cease and desist order, of temporary or indefinite duration, requiring the financial service provider and its board to—
(i) stop the unsafe or unsound practice;
(ii) limit its lending or borrowing;
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