The Lower Chamber of Parliament yesterday passed a new law that will govern the National Bank of Rwanda, an act that that seeks to amend the bank’s 2007 law with view to strengthen its operations in line with the latest developments in the financial sector.

The Minister for Finance and Economic Planning, Claver Gatete, has said that once, enacted into law, the legislation will update the bank’s business to the latest changes in the area of financial sector, with some of its existing operations explicitly mandated in the new law and its management team broadened to meet the current needs.

The bank’s new law will also seek to harmonise its operations with those of sister institutions in the East African Community (EAC) bloc to which Rwanda is affiliated and the financial year of the bank shall start on July 1 of each calendar year and end on June 31 of the following year.

In line with harmonising with the EAC, the title of "Vice Governor” will be replaced by "Deputy Governor”, a title that is used in most of other EAC partner states.

"The bank will abide with international accounting principles and other global standards. We need to harmonise with central bank standards in line with the Basel principles,” Gatete told legislators in June while tabling the Bill in the House.

Basel principles are a set of international banking regulations recommended by the Basel Committee on Bank Supervision (BCBS) that sets out the minimum capital requirements of financial institutions with the goal of minimising credit risk.

The Committee’s Secretariat is located at the Bank for International Settlements (BIS) in Basel, Switzerland and it sets guidelines and standards in different areas such as the international standards on capital adequacy, the Core Principles for Effective Banking Supervision and the Concordat on cross-border banking supervision.

In line with complying with the latest Basel principles, the new law will have the Board of Censors at the National Bank of Rwanda which reports to the Ministry of Finance removed from the supervisory organs of the Central Bank while ensuring well-established corporate governance and accountability of other existing organs.

Two core committees at the bank will also be strengthened, namely the Monetary Policy Committee and the Financial Stability, with the new law aiming at making them statutory and extending the composition of the Monetary Policy Committee to include external members to ensure that the committee gain from additional expertise from outside the bank.

The new law will also explicitly provide powers or prerogatives which are classically known to belong to central banks and that were currently performed by the National Bank of Rwanda, while not clearly formalised in the law.

They include the power to designate financial institutions to serve as the bank’s agents in Rwanda and any financial institutions abroad to act as the bank’s agents or correspondents abroad as well as the power to establish policies regarding payments, clearing and settlement systems.

The central bank has also been given the power to adopt policies to safeguard the rights and interests of depositors and creditors of financial institutions, hold balances in foreign currency with foreign central banks or with the bank’s agent abroad, and invest those balances in marketable foreign securities.

The central bank’s powers that are also explicitly stated in the new legislation include the power to open accounts for foreign central banks, and foreign financial institutions, and to act as a banker to those institutions.

The powers explicitly stated in the draft law also include the right to establish electronic systems for the settlement of payments and securities, as well as set up reserves required to be maintained by banks and other deposit taking institutions within the framework of implementation of the monetary policy.

Under the new law, the Governor of the central bank has also been given the right to appoint a lawyer to represent him or her before the courts and to delegate his or her powers to officers of the bank for the purpose of decentralisation and its smooth management.

After MPs passed the Bill yesterday, it now awaits the President’s assent before its publication in the official gazette.

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