BANK OF ZAMBIA ACT
Arrangement of Sections
Section
PART I
PRELIMINARY PROVISIONS
1. Short title
2. Interpretation
PART II
ADMINISTRATION OF THE BANK OF ZAMBIA
3. Bank of Zambia
4. Capital and ownership of Bank
5. Additional functions of Bank
6. Prohibited activities
7. Board of Directors
8. Functions of Board
9. Delegation of functions of Board
10. Governor
11. Deputy-Governor
12. Prohibition of Governor and Deputy-Governor to engage in other business, profession or employment
13. Resignation or removal from office of Governor or Deputy-Governor
14. Staff of Bank
15. Emoluments and other terms and conditions of service of Governor, Deputy-Governor and other staff
PART III
MONETARY UNIT, BANKNOTES AND COIN ISSUE
16. Currency of Republic
17. Authority to issue banknotes and coins
18. Legal tender
19. Currency features
20. Currency production, safekeeping and inventory
21. Currency exchange
22. Management of unfit currency
23. Exchange of forged, lost, or stolen banknotes or coins
24. Accounting treatment of currency issued
25. Currency recall
26. Counterfeit notes and coins
PART IV
MONETARY POLICY
27. Monetary Policy Committee
28. Composition of Monetary Policy Committee
29. Publication of statement of decisions
30. Publication of minutes
PART V
FINANCIAL STABILITY
31. Financial Stability Committee
32. Composition of Financial Stability Committee
33. Co-operation with other supervisory authorities
34. Publication of Financial Stability Report
PART VI
BANK’S RELATIONSHIP WITH GOVERNMENT
35. Advisor to Government
36. Banker to Government
37. Fiscal agent
38. Advances to Government
39. Limitations on lending to Government
40. Acquisition of securities issued or guaranteed by Government
41. Management of public debt
42. Consultation and exchange of information
PART VII
BANK’S RELATIONSHIP WITH FINANCIAL SERVICE PROVIDERS
43. Banker to banks and financial institutions
44. Bank’s service to financial service providers
45. Publication of Bank’s rates
46. Cash reserve requirement for financial service provider
47. Minimum liquidity asset ratios and reserve requirements
48. Disclosures by financial service providers
49. Consultation with financial service providers
50. Money market and foreign exchange market
51. Regulation and supervision of financial service providers
PART VIII
INTERNATIONAL RESERVES AND FOREIGN EXCHANGE OPERATIONS
52. Exchange rate policy
53. Maintenance of official international reserves
54. Bank depository of external assets
55. Authorised transactions and limitation of contracting parties
PART IX
REGULATION AND SUPERVISION OF PAYMENT SYSTEMS
56. Mandate over payment system
57. Regulation and supervision of payment system
PART X
GENERAL PROVISIONS
58. Furnishing of information
59. Oath or affirmation of secrecy
60. Confidentiality
61. Examination of financial or payment system service providers
62. Exemption from taxes
63. Restriction on execution against property and assets of the Bank
64. Restriction of liability
65. Fees and recovery of expenses
66. Offences relating to directorship and acceptance of gifts
67. Offences relating to currency
68. Offences relating to non-disclosure of information or furnishing of false information
69. General penalty
70. Administrative penalties
71. Offences by principal officers of body corporate or unincorporate body
72. Liquidation, dissolution or winding up of Bank
73. Regulatory statement
74. Regulations
75. Repeal of Act No. 43 of 1996 and savings and transitional provisions
AN ACT
to provide for the additional functions, operations and management of the Bank of Zambia; provide for the composition of the Board of Directors of the Bank of Zambia and provide for their functions; provide for the establishment of the Monetary Policy Committee and the Financial Stability Committee and provide for their functions; repeal and replace the Bank of Zambia Act, 1996; and provide for matters connected with, or incidental to, the foregoing.
[11th August, 2023]
Act 5 of 2022,
SI 25 of 2023.
PART I
PRELIMINARY PROVISIONS
This Act may be cited as the Bank of Zambia Act.
In this Act, unless the context otherwise requires—
"active politics" has the meaning assigned to the words in the Benefits of Former Presidents Act;
"associate" has the meaning assigned to the word in the Anti-Corruption Act;
"Bank" means the Bank of Zambia established under the Constitution and continued in existence under section 3;
"bank" has the meaning assigned to the word in the Banking and Financial Services Act;
"banking business" has the meaning assigned to the words in the Banking and Financial Services Act;
"Board" means the Board of Directors of the Bank constituted under the Constitution;
"emoluments" has the meaning assigned to the word in the Constitution;
"Emoluments Commission" means the Emoluments Commission established by the Constitution;
"financial business" has the meaning assigned to the words in the Banking and Financial Services Act;
"financial institution" has the meaning assigned to the words in the Banking and Financial Services Act;
"financial service" has the meaning assigned to the words in the Banking and Financial Services Act;
"financial service provider" has the meaning assigned to the words in the Banking and Financial Services Act;
"financial intermediary" means an entity that provides a financial service and facilitates a financial transaction among persons;
"Financial Stability Committee" means the Financial Stability Committee established under section 31;
"financial system" means a set of financial intermediaries, financial markets and financial infrastructure that facilitates the exchange of funds and assets among persons;
"financial system stability" means the financial system’s resilience to shocks and its ability to smoothly conduct its core tasks of intermediation of financing, transmission of payments, pricing of instruments and re-distribution of risks;
"general reserve fund" means the general reserve fund of the Bank continued and maintained under paragraph 10 of the First Schedule;
"legally disqualified" means the absence of legal capacity as provided under section 4 of the Mental Health Act;
"macro-prudential" means the use of prudential tools to limit systemic risks by strengthening the resilience of the financial system and decreasing the build-up of vulnerabilities, thereby ensuring a sustainable contribution of the financial sector to economic growth;
"member" means a person appointed as a director of the Board in accordance with section 7;
"Monetary Policy Committee" means the Monetary Policy Committee established under section 27;
"official international reserves" means the reserves specified under section 53;
"ordinary revenue" means revenue from taxes, levies, royalties, fees, duties, rents, profits and income from any investment or any undertaking by the Government, Government institutions and agencies, statutory bodies and local authorities, but does not include any funds raised by way of borrowing, grants in cash or in kind, or any other form of economic assistance;
"payment service provider" means a person licensed or authorised by the Bank under the National Payment Systems Act, to provide a service or system that facilitates the transfer of funds from one person to another using various forms of payment instruments;
"payment system" has the meaning assigned to the words in the National Payment Systems Act;
"public officer" has the meaning assigned to the words in the Constitution;
"regulated entity" means a person licensed under the Banking and Financial Services Act, the National Payment Systems Act and the Credit Reporting Act to carry out a licensed activity;
"regulatory statement" has the meaning assigned to the words in the Banking and Financial Services Act;
"relative" has the meaning assigned to the word in the Anti-Corruption Act;
"repealed Act" means the Bank of Zambia Act;
"revaluation reserve account" means a reserve account maintained in the financial records of the Bank to which unrealised gains and losses from gold, special drawing rights, foreign currency or other financial instruments are transferred from the income statement;
"secondary market" means the market where persons trade the previously issued debt securities;
"securities" has the meaning assigned to the word in the Securities Act;
"superior court" has the meaning assigned to the words in the Constitution;
"supervisory authority" has the meaning assigned to the words in the Financial Intelligence Centre Act; and
"systemic risk" means the risk of disruptions to the provision of banking and financial services that is caused by an impairment of all or parts of the financial system and can cause serious negative consequences for the real economy.
PART II
ADMINISTRATION OF THE BANK OF ZAMBIA
(1) The Bank of Zambia established by the Constitution is a body corporate with perpetual succession and a common seal, capable of suing and being sued in its corporate name, and with power, subject to the provisions of this Act, to do all acts and things that a body corporate may, by law, do or perform.
(2) The First Schedule applies to the Bank.
4. Capital and ownership of Bank
(1) Subject to sub-section (2), the authorised capital of the Bank is five hundred million kwacha.
(2) The Board may, subject to the consent of the Minister, increase or reduce the authorised capital of the Bank to an amount the Board may determine by resolution.
(3) The Government shall be the sole subscriber to the paid-up capital of the Bank and the Bank’s holdings of the paid-up capital shall not be transferable to any person in whole or in part or be subject to any encumbrance.
(4) The Government shall pay in full any increase in the authorised capital effected under sub-section (2).
(5) Despite other provisions of this Act, the Minister shall transfer ownership to the Bank negotiable interest-bearing securities, at market rate, issued by the Government, for an amount the Board may determine is necessary for the purpose of preserving the Bank’s capital from any impairment.
5. Additional functions of Bank
(1) Subject to the Constitution, the additional function of the Bank is to formulate and implement monetary and supervisory policies, directed at achieving and maintaining price stability and financial stability.
(2) Where it is considered that there is a conflict between price stability and financial stability referred to under sub-section (1), price stability shall take precedence.
(3) Despite the generality of sub-section (1), the functions of the Bank are to—
(a) formulate and implement macro-prudential policies;
(b) implement the exchange rate policy;
(c) hold and manage the international reserve assets of the Republic;
(d) licence, regulate and supervise financial service providers and credit reporting agencies;
(e) establish, conduct, monitor, regulate and supervise, and promote the soundness and safety of payment systems;
(f) act as a banker and fiscal agent to the Government;
(g) act as a banker to banks;
(h) assist the Government in the management and administration of domestic and external debt;
(i) foster the liquidity, solvency and proper functioning of a stable market-based financial system;
(j) provide banking services for the benefit of foreign governments, foreign central banks and monetary authorities, and for the benefit of international organisations in which the Bank or the Government participates;
(k) collaborate with international financial institutions in furtherance of the Bank’s functions;
(l) undertake and discharge responsibilities, and perform transactions, concerning the Government’s participation in international organisations;
(m) act as an economic adviser to the Government;
(n) issue debt securities on behalf of the Government on terms and conditions that the Bank considers appropriate;
(o) issue debt securities for the purpose of implementing monetary policy on terms and conditions that the Bank considers appropriate;
(p) acquire shares in any domestic or international institution, company or other body in furtherance of the Bank’s functions;
(q) regulate the foreign currency market;
(r) grant secured or unsecured loans and advances to any of the Bank’s subsidiaries in furtherance of the Bank’s functions or its staff as approved by the Board;
(s) assist financial service providers in financial difficulty;
(t) acquire, in the course of satisfying a debt, any interest or right if that interest or right can be disposed of at the earliest suitable opportunity;
(u) buy, sell or otherwise deal in—
(i) financial instruments and, in accordance with the provisions of any other written law regulating the safe deposit of securities, hold the financial instruments in safe custody, or cause the financial instruments to be held in safe custody, for any person;
(ii) gold and other precious metals, and hold in safe custody, for any person, gold and other precious metals, securities or other articles of value;
(iii) foreign currency;
(iv) notes, bills, securities or other instruments of indebtedness issued or guaranteed by local authorities, public entities or any foreign country that the Board may determine; and
(v) discount or re-discount bills of exchange or promissory notes issued for commercial, industrial or agricultural purposes;
(v) issue its own interest-bearing securities for purposes of implementing monetary policy and buy, sell, discount or re-discount, or grant loans or advances against those securities;
(w) enter into, repurchase or reverse repurchase agreements with any institution in respect of interest-bearing securities or other securities that the Bank may determine;
(x) effect transfers in accordance with generally accepted banking practice and sell drafts drawn on the Bank’s branches and correspondents;
(y) open accounts in financial institutions in foreign countries and appoint agents or correspondent banks carrying on business outside the Republic;
(z) make arrangements or enter into an agreement with any institution, locally or in a foreign country, to borrow foreign currency at a rate of interest and on terms that the Bank considers appropriate, in furtherance of the Bank’s functions;
(aa) by notice, direct any person to furnish the Bank, within a specified period of time, with any specified information that the Bank may reasonably require—
(i) to determine the balance of payments;
(ii) for purposes related to financial system stability;
(iii) for statistical reports; or
(iv) for the performance of any other function of the Bank under this Act;
(bb) promote the effective and efficient operation of the foreign exchange system by monitoring—
(i) foreign exchange inflows and outflows and amounts remitted;
(ii) import and exports of goods and services;
(iii) international transactions in goods and services;
(iv) international transfers to or from residents and non-residents;
(v) profits or dividends received or paid in respect of investments abroad and foreign investment in the Republic;
(vi) borrowings and trade credits from non-residents;
(vii) investment in the form of equity and debt securities abroad;
(viii) receipts and payments of both principal and interest on loans to non-residents;
(ix) international money transfers into and out of the Republic; and
(x) any other transaction the Bank may prescribe;
(cc) promote the continuous development of the domestic financial markets and the safe, sound and efficient operation and the development of the financial system;
(dd) co-operate with or assist other domestic or international regulatory authorities who are in the field of banking or finance or any other field as the Board may approve; and
(ee) regulate the rate of interest and other charges that a financial service provider and a payment service provider may impose on a financial transaction.
Except as otherwise expressly authorised by this Act, the Bank shall not—
(a) engage in trade;
(b) accept shares as security;
(c) acquire immovable property other than in the ordinary course of business;
(d) grant an unsecured loan;
(e) enter into a risk insurance contract other than to further its own interests;
(f) guarantee a loan, advance or debt of the Government or a public body; or
(g) participate in the primary auction of Government securities.
(1) The Board of Directors of the Bank consists of the following members—
(a) the Governor, as Chairperson;
(b) six members appointed by the Minister; and
(c) a representative of the Secretary to the Treasury, as an ex officio member.
(2) The members appointed under sub-section (1)(b) and (c), shall be part-time members of the Board.
(3) A member appointed under sub-section (1)(c) shall not—
(a) count for the purposes of a quorum;
(b) vote on any question relating to the deliberations of a meeting of the Board; or
(c) be a member of the audit committee of the Board.
(4) The members of the Board shall elect the Vice-Chairperson from among themselves.
(5) A person qualifies for appointment as member of the Board if the person has—
(a) proven integrity;
(b) a degree from a recognised higher education institution; and
(c) knowledge and experience of at least five years in the field of central banking, economics, banking, finance, law accounting, auditing or other discipline relevant to central banking.
(6) A person does not qualify for appointment as a member of the Board if that person—
(a) is an undischarged bankrupt;
(b) is legally disqualified from performing the functions of the Board;
(c) is a Member of Parliament, or performs legislative, executive, judicial functions or holds office in a local authority;
(d) is a director, officer, employee or a shareholder in, or owner of, a regulated entity or provides professional services to the Bank or regulated entity;
(e) is convicted of an offence and sentenced to a term of imprisonment exceeding six months without the option of a fine;
(f) is disqualified or suspended from practising any profession on the grounds of professional misconduct or dismissed from a position of trust due to misconduct;
(g) is an employee of Government, except for a representative of the Secretary to the Treasury; or
(h) is engaged in active politics.
(7) The Minister may, remove a member of the Board under sub-section (1)(b) from office on the following grounds—
(a) breach of any provision of this Act;
(b) gross misconduct;
(c) has been convicted of an offence and sentenced to a term of imprisonment exceeding six months without an option of a fine.
(8) A member of the Board may resign from office at any time, by giving a notice, in writing, to the Minister.
(9) The First Schedule applies to the Board.
(1) The Board is the governing body of the Bank.
(2) Subject to the Constitution and this Act, the functions of the Board are to—
(a) have oversight over the operations and affairs of the Bank;
(b) provide strategic policy direction to the Bank;
(c) provide effective governance of the Bank;
(d) approve the regulations and regulatory statements to be issued by the Bank;
(e) approve the Bank’s budget;
(f) approve the annual report;
(g) approve recommendations specified in any other written law that the Bank is required to make;
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