Veteran banker backs Finance Bank take-over

VETERAN banker Kaitano Chungu has backed the decision by the Bank of Zambia (BoZ) to take over operations of Finance Bank Zambia, describing it as a professional move that will save the country’s economy and the institution from collapse.
Mr Chungu, a former managing director of Zambia National Commercial Bank who also served in various organisations, including the World Bank, described the incessant attacks on the central bank over the decision it had taken as unfair.
He said in an interview that the central bank was mandated to strictly follow the law but had remained tolerant with Finance Bank which was clearly operating outside the set guidelines.
Mr Chungu said the Banking and Financial Services Act did not allow an individual whether directly or through associates to own more than 25 per cent shares in any bank and wondered whether Finance Bank had not gone against the Act.
He said there was information that the shareholding structure of the bank was not in line with the laws, and the action by the central bank to take over a commercial bank was not peculiar to Zambia or Finance Bank.
He said the BoZ did not take a hasty decision because it even engaged authorities at Finance Bank in negotiations for more than two years before the decision to take over operations was made.
Mr Chungu, who managed the transition of Meridian Bank as a Government-appointed managing director after BoZ took over operations of the institution for breaching the law, said the law did not allow shareholders to use depositors’ money to buy fixed assets such as buildings while insider lending was a serious offence, apart from being unethical.
He said as a professional, he had decided to speak out because BoZ had faced unnecessary criticism from some private media houses without looking at the allegations facing the bank.
He said commercial banks were not owned by shareholders and that they only own fixed assets of the bank only if they had not been acquired using depositors’ money.
Mr Chungu said because of similar transgressions, Safe Deposit Bank, Manifold Investment Bank, Chase Trust Bank, Prudence Bank, Commerce Bank of Zambia, Credit Africa Bank, Union Bank, Bank of Credit and Commerce, and Meridian BIAO Bank were closed in the 1990s.
He said the situation was the same internationally and cited Nigeria and Swaziland that had taken similar actions to safeguard the interests of depositors and the economy.
Mr Chungu said the banks closed because they generally allowed dominant single shareholders in breach of the law, while others had bad credit portfolios and were under-capitalised.
He said the central bank had taken a timely step in the interest of the economy and the depositors, and assured depositors that with such interventions they should be assured that their money was safe.
Mr Chungu said the central bank presently has a strong monitoring mechanism such as the capital adequacy regulation of 1995, insider lending regulation of 1996, anti-money laundering directives of 2004, corporate governance guidelines of 2006 and the risk management guidelines in 2006.
“So the fact is that BoZ has not grabbed Finance Bank from shareholders. The shareholders assets will remain the same in line with the law but the money belonging to depositors must be secured because it does not belong to shareholders,” he said.

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