By:Shipena
The Bank of Namibia (BoN) has issued a stern warning to commercial banks over profit shifting.
“Banks were informed that the Bank of Namibia will not entertain profit shifting and transfer pricing practices, which are done via service level agreements with the parent institution,” said central bank Governor Johanness !Gaxawab.
He said this at a recent BoN seminar organised to showcase its supervisory methodology to top executives from African financial institutions and conglomerate companies.
!Gawaxab also stressed that credit decisions and approvals should be made by personnel authorised by the central bank and deemed suitable and in-country.
He highlighted that no credit decisions should be made outside of Namibia by people who have not been approved or certified competent and acceptable to undertake Namibian banking institution activity by the BoN.
The Governor pointed out the sector must be responsive and transformative in order to prevent clashes with the Namibian society.
He noted that exorbitant banking fees and levies have become a major popular and legislative concern.
The Bank of Namibia recently adopted the Banking Institutions Act, 2023 (Act 13 of 2023) and the Payment System Management Act, 2023 (Act 14 of 2023).
According to the BoN, these laws have established a world-class regulatory and supervisory structure, indicating the country’s commitment to provide responsive and improved financial services.
“The new rules are a watershed moment for the sector as it transitions towards a future-fit operating model in accordance with Namibians’ ambitions for a financial system that works for them,”!Gaxawab said.
He added that the new regulations require Namibian banking institutions to have independent and autonomous boards that oversee effective governance, transparency, and accountability, which is essential for a stable and sound financial system.
!Gawaxab stressed that good board succession plans should prioritise term limits and age to prevent board members from overstaying their terms while providing sufficient monitoring in accordance with the Board of Directors’ fiduciary responsibility.
He said the new regime is based on integrating local decision-making in the best interests of Namibians.
According to the BoN, the recently enacted Acts will put financial system stability above all else while attaining Namibia’s ambitions for financial system inclusiveness and change.
“Namibia’s financial system is at a crossroads, and operating models that have been successful in the past may not be successful in the future,”the Governor stated.
While speaking to The Villager, financial expert Salmo Iipinge said Namibia’s banking industry has extremely minimal legislative systems in place.
“There are no sufficient laws that govern the financial sector,” he said.
He did, however, mention that the authorities are working on this or have already adopted a number of legislation.
“But we as a public, we need to be awake to scrutinise all these Acts being passed to identify hidden aspects that still protect financial institutions or the banks from their malpractices,”he Iipinge.
Iipinge stated that the banks are engaged in the creation of these regulations “so that they can protect themselves from still exploiting the consumer.”