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July 15, 2019

Tanzania penalises Diamond Trust Bank for regulatory breaches

The central bank of Tanzania has fined local lender Diamond Trust Bank for violating regulatory rules on data and service availability.

In an e-mailed statement to Reuters, Bank of Tanzania said: “The Bank of Tanzania has imposed a penalty charge of one billion shillings [$435,000] to Diamond Trust Bank … for failure to implement a directive to establish a data centre in Tanzania.”

According to the central bank regulations, all the financial institutions are required to establish a primary or secondary data centre in the country to ensure continuous service availability.

The move comes at a time when the central bank has strengthened oversight on the banks due to poor performance.

Bank of Tanzania also suspended the appointment of TIB Corporate Bank managing director Frank Nyabundege. The decision was taken owing to the poor performance of the lender.

The Tanzanian banking sector has been struggling with growth following an increase in bad loans.

Since 2017, Bank of Tanzania has revoked licences of at least nine lenders to ensure stability of the banking sector.

In December last year, the International Monetary Fund (IMF) in a report said that nearly half of Tanzanian banks are at the risk of insolvency. It said that 22 out of Tanzania’s 45 banks would be undercapitalised in the tail risk scenario.

Last month, Tanzania decided to reduce the capital reserve requirements of the banks to support lending. The move, which reduces the capital reserve ratio from 8% to 7%, is aimed at boosting lending in the country.

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