Monday, March 10, 2014

BoZ calls on banks to improve risk management
By Gift Chanda
Thu 05 Dec. 2013, 14:00 CAT

THE Bank of Zambia has called on commercial banks to improve risk management to withstand external shocks as they deepen links with the global financial system.

Speaking at a PricewaterhouseCooper (PwC) organised discussion forum for bank directors and executive committee members of management held in Lusaka yesterday, Dr Tukiya Kankasa-Mabula, BoZ deputy governor in charge of operations, emphasized the importance of safe and sound banking systems. She said countries and their commercial banks must evolve with international trends to manage risks.

"To be part of the international financial system and to remain competitive, countries have to adopt internationally accepted standards," she said.

She highlighted the role the Basel II framework could play in further enhancing the risk management practices of banks.

The Basel II framework is an internationally adopted best practice standard that promotes better risk management, greater transparency and corporate governance in the operation of commercial banks.

"Questions have been raised by the industry, especially in developing countries, about the relevance of the Basel framework as it was designed for internationally active banks," Dr Kankasa-Mabula said.

Dr Kankasa-Mabula said the position of the central bank was that as Zambia integrates with the rest of the world, the country cannot afford to have regulatory standards in the financial sector that deviate from global ones.

"Any deviation will hurt the country both by way of perception and also in actual practice. The perception of a lower standard will put Zambian banks at a disadvantage in global competition," she said.

"In practice, it has to be recognised that Basel II provides for improved risk management systems in banks. It is important that Zambian banks have the cushion afforded by these risk management systems, to withstand shocks from the external systems, especially as they deepen their links with the global financial system."

And Stephen Scott, a senior associate at PwC South Africa, said commercial banks that adopt the Basel II framework may find it easier to tap into capital markets to boost onward lending especially to the SMEs.

He said the adoption of the Basel II framework by commercial banks would be a step in the right direction.

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