CENTRAL BANK OF LESOTHO ACT 2000

Arrangements of sections

PART I  -  PRELIMINARY

SECTION

1.           Short title and commencement

2.           Interpretation

3.           Application

PART II   -   CONTINUATION, OBJECTIVE AND FUNCTIONS

OF THE BANK 

4.            Continuation of the Bank

5.            Objective of the Bank

6.            Functions

7.            General powers

PART III   -   ADMINISTRATION

8.             Board of Directors

9.             Governor and Deputy Governors

10.           Other directors of the Bank

11.           Disqualification from and the cessation of appointment

12.           Substitutes

13.           Meetings of the Board

14.            Validity of acts

15.           Disclosure of interest

16.           Appointment of officers and other staff

17.           Establishment of various departments

18.           Secrecy

PART IV   -   CAPITAL, PROFITS AND RESERVES

19.           Authorised capital

20.           Paid-up capital of the Bank

21.           Profits and general reserves

PART V    -   CURRENCY

22.         Currency of Lesotho

23.         Sole right to issue currency

24.         Obligation in respect of currency

25.         Agents for the issue, exchange and withdrawal of currency

26.         Denomination and form of notes and coins

27.         Bank’s currency to be legal tender

28.         Tampering with coins

29.         Lost and damaged currency

30.         Counterfeit currency

PART VI   -   FOREIGN EXCHANGE REGIME, EXCHANGE RATE POLICY AND INTERNATIONAL RESERVES

31.         Foreign exchange regime

32.         Exchange rate policy

33.         Foreign exchange rules

34.         Clearing and payment agreements

35.         International reserves

36.         Reporting of foreign exchange transactions

PART VII   -  OPERATIONS

37.         Management of monetary system

38.         Prohibited activities

39.         Determination of interest and discount rates

PART VIII   -   RELATIONS WITH THE GOVERNMENT

40.         Bank as banker to the Government

41.        Financial advice to the Government

42.        Credit to the Government

43.        Bank as agent for the Government

44.        Depository

45.        External debt

46.        Reports on economy 

PART IX   -   RELATIONS WITH LICENSED  INSTITUTIONS

47.         Cooperation with licensed institutions in Lesotho

48.         Required reserves

49.         Bank to limit credit expansion

50.         Clearing houses

PART X   -   ACCOUNTS AND STATEMENTS

51.         Financial year of the Bank

52.         Audit

53.         Accounts and annual report

54.         Revaluation Reserve Account

PART XI   -   MISCELLANEOUS

55.         By-laws

56.         Tax status

57.         Prohibited names

58.         Liquidation

59.         Collection of information

60.         Credit information

61.         Bank to collect and furnish credit information

62.         Bank to call for returns containing credit information

63.         Procedure for furnishing credit information to licensed institutions

64.         Disclosure of information prohibited

65.         Certain claims for compensation barred

66.         Penal provisions

67.         Offences and penalties

68.         Liability for damages

69.         Regulations

70.         Repeal and savings

71.         Transitional

ACT NO. 2 OF 2000

CENTRAL BANK OF LESOTHO ACT 2000

An Act to continue the existence of the Central Bank of Lesotho, to enable it to ensure price stability, to provide for its administration and control and for related matters.

ENACTED BY THE PARLIAMENT OF LESOTHO PART I  - PRELIMINARY

Short title and commencement

1. This Act may be cited as the Central Bank of Lesotho Act 2000, and

shall come into operation on the date of its publication in the Gazette save that different dates may be  appointed by the Minister for different provisions of this Act.

Interpretation

2.  In this Act, unless the context otherwise requires –

“appointing authority” means-

(a)     in relation to the Governor and Deputy Governors, the King acting on the advice of the Prime Minister;

(b)     in relation to the other directors, the Minister;

“bank” means any financial institution whose functions include receiving

deposits, honouring instruments drawn against them, and paying interest on

them as permitted by law;

“banking business” has the same meaning assigned to it under the Financial Institutions Act 1999;1

“Board” means the Board of Directors of the Central Bank of Lesotho;

“capital market” means the market for the purchase and sale of medium and long term financial instruments;

“credit business” has the same meaning assigned to it under the Financial Institutions Act 1999;

“Deputy Governor” means a Deputy Governor of the Central Bank of Lesotho appointed under section 9;

“Director” means a member of the Board of Directors of the Central Bank of Lesotho appointed under section  10;

“court” in relation to any financial institution means the High Court of Lesotho and, in relation to any offence against this Act, includes a subordinate court having jurisdiction in respect of that offence;

“financial institution” means an institution which performs banking business or credit business;

“Government” means the Government of the Kingdom of Lesotho;

“Governor” means the Governor of the Central Bank of Lesotho appointed under section 9;

“licensed institution” means an institution licensed under  the Financial Institutions Act 1999, the Money Lenders Order 19892, the Building Finance Institutions Act 19763,  or an institution registered under the Insurance Act 19764;

“Management” means the Governor, Deputy Governors and Heads of Department of the Bank;

“Minister” means the Minister of Finance;

“the Bank” means the Central Bank of Lesotho.

“Securities” means treasury bills, notes, commercial papers, bankers’ acceptance, certificates of deposit, bonds, debentures, stock and other financial instruments issued by Government.

Application

3.  This Act applies to the whole of the Kingdom of Lesotho and, where

appropriate, to the operations of the offices and agents, outside Lesotho, of the Bank

or of any licensed institution.

PART II  - CONTINUATION, OBJECTIVE AND FUNCTIONS OF THE BANK

Continuation of the Bank

4. (1)   The Bank, as established by the Central Bank Act 19785, shall, subject to this Act, continue to function as the Central Bank of Lesotho which is a body corporate having perpetual succession, a common seal and capable of suing and being sued in its own name.

(2)  The Bank shall have its principal place of business in Maseru.

(3)  The Bank may, in accordance with the decision of the Board –

(a)      establish branches within Lesotho;

(b)      appoint agents in Lesotho and agents and correspondents abroad; and

(c)     establish offices abroad.

Objective of the Bank

5. The objective of the Bank is to achieve and maintain price stability.

Functions

6.  The functions of the Bank shall be –

(a)  to foster the liquidity, solvency and proper functioning of a  stable market-based financial system;

(b)  to issue, manage and redeem the currency of Lesotho;

(c) to formulate, adopt and execute the foreign exchange policy  of Lesotho;

 (d) to formulate, adopt and execute the foreign exchange policy  of Lesotho;

(e)    to license or register and supervise institutions pursuant to the Financial Institutions Act 1999, the Money Lenders Order 1989, the Building Finance Institutions Act 1976, and the Insurance Act 1976;

(f) to own, hold and manage its official international reserves;

(g) to act as banker and adviser to, and as fiscal agent of,  the Government of Lesotho;

(h)  to promote the efficient operation of the payments system; and

(i)   to promote the safe and sound development of the financial  system.

 (j)  to monitor and regulate the capital market. 

General powers

7.   (1)   The Bank may –

(a)     issue demand drafts and effect other kinds of remittances payable at its own principal place of business, branches and offices or at those of its agencies or correspondents;

(b)     import,  export, refine, hold, sell, purchase, transfer or otherwise deal in gold, gold coins and bullion, silver and such other precious metals as the Board shall determine;

(c)     open accounts for, accept deposits from and make credit available pursuant to the provisions of this section, only to the Government;

(d)     pursuant to paragraph (c), purchase, sell, discount and rediscount inland bills of exchange and promissory notes arising out of bona fide commercial transactions;

(e)     purchase with or without a resale agreement, sell, discount and rediscount treasury bills and bonds of the Government forming part of a public issue;

(f)      purchase and sell other securities of the Government maturing in not more than 20 years which have been publicly offered for sale or form part of an issue which is being made to the public at the time of acquisition:

Provided that such funds shall be deployed in financing projects with a gestation period of not more than 7 years and which are self-amortising;

(g)     invest in securities of the Government for any amount and to mature at any time, on behalf of staff funds and superannuation funds and other internal funds of the Bank;

(h)     grant to any financial institution advances for fixed periods not exceeding 3 months against publicly issued treasury bills of the Government maturing within 93 days;

(i)       grant to any financial institution advances for fixed periods not exceeding 3 months against promissory notes secured by pledge with the Bank –

(i)  in gold coin or gold bullion;

(ii) in securities of the Government  which have been publicly offered for sale and are to mature within a period  of 20 years:

Provided that no advance so secured shall at any time exceed 75% of the market value of the security pledged and that the total of such securities held by the Bank (whether under the provisions of this sub-paragraph or otherwise) is within the limitations imposed by the proviso to paragraph (f);

(iii) in such bills of exchange and promissory notes as are eligible for purchase, discount or rediscount by the Bank:

Provided that no advance so secured shall exceed 75% of the nominal value of the instruments so pledged;

(iv) in warehouse warrants or other documents of title to goods in respect of staple commodities or other goods, duly insured and with a letter of hypothecation from the owner:

Provided that no such advance shall exceed 60% of the current market value of the commodities in question;

(v)   in such assets other than those specified in the foregoing sub-paragraphs, and on terms and conditions which the Bank may prescribe;

(j)       purchase and sell external currencies and purchase, sell, discount and rediscount bills of exchange and     treasury bills drawn and payable in freely convertible foreign currencies and maturing within 90 days, exclusive of days of grace, from the date of acquisition;

(k)     purchase and sell securities issued and expressed in the currency of any country outside Lesotho whose currency is freely convertible and is issued or guaranteed by the Government of such country, and securities issued or guaranteed by international financial institutions;

(l)       maintain accounts with central banks and other banks abroad and act as correspondent, banker or agent for any central or other bank or other monetary authority and for any international financial institution of which Lesotho is a member;

(m)   undertake the issue and management of  loans publicly issued in Lesotho by the Government or by public bodies on such terms and conditions as may be agreed;

(n)     accept from customers for custody securities and other articles of value;

(o)     undertake on behalf of customers and correspondents the purchase, sale collection and payment of securities, currencies and credit instruments at home and abroad, and the purchase and sale of gold and silver;

(p)     promote the establishment of a financial institutions clearing system and provide facilities therefor;

(q)     issue, place, buy and sell its own securities on such terms and conditions, as may be determined by the Board in consultation with the Government: 

Provided that any security issued by the Bank which is purchased or redeemed by the Bank shall not be included among its assets and shall be immediately retired and cancelled;

(r)      with the permission of the Government, make contribution of capital or advances to any foreign financial institution or undertake exchange clearing transactions with such foreign institution;

(s)     with the approval of the Government, participate in and promote growth of any currency union, and undertake exchange clearing or other financial transactions or make contribution of capital or any other dues payable by Lesotho as a member to such institution;

(t)      with the approval of the Minister, borrow from institutions and pledge assets or create lien over assets held by it as security for the repayment of such loan;

(u)     acquire, hold and dispose of movable and immovable property for the purposes of its functions; and

(v)     incur such expenditures as it may deem necessary for the proper discharge of its functions.

(2)        Notwithstanding this Act or any other enactment for the time being in force, the Bank may contribute or donate funds to an institution or body corporate in Lesotho for the study or promotion of, or research in, banking, economics and allied subjects:

Provided that such donation or contribution shall not exceed 5% of the estimated surplus distributable profits of the Bank for the current year after making full provision for the statutory and customary funds, charges and obligations of the Bank.

(3)      The validity of any loan or advance granted by the Bank in

pursuance of this Act shall not be called in question merely on the ground of non-compliance with the requirements of some other enactment or of any resolution, contract, memorandum or, articles of association or other instrument.

PART III – ADMINISTRATION

Board of Directors

8. (1) There shall be a Board of Directors of the Bank which shall be responsible for the policy and general administration of the affairs and business of the Bank.

(2)   The Board shall consist of –

(a)  the Governor who shall be chairperson;

(b)  2 Deputy Governors; and

(c) 5 other directors.

(3)    The Governor, or in his absence or temporary incapacity, one of

The Deputy Governors, in order of seniority, shall be in charge of the day-to-day management of the Bank.

Governor and Deputy Governors

9.      (1)  The Governor and Deputy Governors shall –

 (a)  each be appointed by the King, acting on the advice of the Prime Minister, for a term of 5 years   and may be eligible for re-appointment:

Provided that in appointing the Deputy Governors, the King, acting on the advice of the Prime Minister, shall designate one of them as First Deputy Governor and the other one as Second Deputy Governor;

(b)      be persons of recognized financial experience; and

(c)       be appointed on such terms and conditions, which may not be altered to their disadvantage during their tenure of  office, as shall be set out in their respective contracts of   appointment.

(2)      The Governor shall be the Chief Executive of the Bank and shall perform the following functions- – 

(a)  the execution of policies and measures approved by the Board and, subject to any such policies and measures as may be applicable, the direction, supervision, and control of the operations of the Bank and its internal management and administration;