New Laws To Change The Face Of Banking
By Ignatius Stephen

Bandar Seri Begawan - Brunei has revolutionised its banking laws bringing about far reaching changes in the conduct of banking in the country to strictly regulate the industry.

The New Banking Order 2006 among other things says that for a locally incorporated bank, it is required to have its issued and paid up capital of not less than B$100 million.

For a foreign bank operating within Brunei, its issued and paid up capital should be not less than B$1 billion and the local branch must hold net head office funds of not less than B$30 million while doing business in Brunei.

The banks are given one year from the Order's commencement date of March 4, 2006, or such later date as the Banking Authority may decide, to comply with. A briefing on the new Banking Order 2006 was organised by the Brunei Association of Banks at the Mutiara Room, Sheraton Utama Hotel yesterday.

It was attended by all the CEO’s and Country Managers of the member banks together with their senior managers, operational and legal compliance officers, as well as officials from the Ministry of Finance.

The briefing was conducted by Dr Ronnie Lee, a leading banking and corporate Lawyer together with Pg Izad-Ryan Bahrin, from the law firm Messrs Pengiran Izad & Lee, who are the appointed legal advisors to the Brunei Association of Banks. The new Order, now with 131 sections, has replaced the old Banking Act of 1956, which consisted of a mere 15 sections.

Yesterday's briefing centred on a number of pertinent issues of concern and interest to the banks. The briefing also gave an insight into the provisions relating to prohibition of accrual of interest on past due loans.

A bank is now by law not permitted to accrue interest income from loan to be shown as the bank's earnings which are two years or more past due.

However, a bank can legally continue to charge its defaulting customers interest for loans two years or more past due.

This will prevent banks from indicating in its books stronger financial position than is actually the case. Section 25 of the Order enables the Banking Authority to issue guidelines for bad and doubtful debts.

The briefing was followed by an exposition upon the topical and urgent issue of unclaimed monies.

Monies in an account that have not been operated for over six years shall be required to be forwarded to the Banking Authority. On the other hand, if the owner of the money can be identified and located, the money (whether in his own current or saving account) shall be returned to the customer after the six years' dormant period.

In accordance with the new Order, the banks' first return on unclaimed monies shall be within three months from December 31 this year, unless a longer period is allowed by the Banking Authority. A question and answer session concluded the briefing.

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