BANKING AND FINANCIAL SERVICES ACT

Arrangement of Sections

   Section

PART I
PRELIMINARY PROVISIONS

   1.   Short title and commencement

   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
PRUDENTIAL REGULATION AND SUPERVISION

   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

   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.   Statement of affairs of assets and liabilities on taking possession

   73.   Actions where financial service provider is solvent

   74.   Actions where financial service provider is insolvent

   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.   Decisions 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.

[On Notice]

Act 7 of 2017.

PART I
PRELIMINARY PROVISIONS

1.   Short title and commencement

This Act may be cited as the Banking and Financial Services Act, 2017 and shall come into operation on the date appointed by the Minister by statutory instrument.

2.   Interpretation

   (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 percent 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, 2017;

“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 chequeing 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, 2017;

“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, 2017;

“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)   paidup 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, 2010;

“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, 2017; 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 buildup 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 email 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, 2017;

“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 percent of the shares; or

   (d)   a company in which a bank or a financial institution owns more than 10 percent of the outstanding shares;

“insolvency” means a situation where a financial service provider—

   (a)   is unable to pay debts as they fall due;

   (b)   has assets that are insufficient to meet liabilities; or

   (c)   has regulatory capital which is below the prescribed minimum;

“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, 2017;

“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, 2017;

“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, 2010;

“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, 1994;

“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 percent 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, 2017;

“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, 2008.

   (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, 2017, the Corporate Insolvency Act, 2017, the Securities Act, 2016, or any other relevant Act, shall have the meaning assigned to them in those Acts.

3.   Application of Act

   (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, 2016 in relation to the regulation of securities, the Securities Act, 2016 shall prevail to the extent of the inconsistency.

PART II
LICENSING OF FINANCIAL SERVICE PROVIDERS

5.   Types of licences

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 that contravenes this section commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding four years, or to both.

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.

8.   Grant of licence

   (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.

9.   Display of 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.

11.   Validity of licence

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 c

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