INSTITUTE OF BANKERS IN MALAWI

ADVANCED DIPLOMA IN BANKING EXAMINATION

SUBJECT: ADVANCED BANKING LAW (IOBM – AD)

Date: Monday, 7th November 2016

Time Allocated: 3 hours (13:30 – 16:30 Hours)

INSTRUCTIONS TO CANDIDATES

1 This paper consists of TWO Sections, A and B.

2 Section A consists of 4 questions, each question carries 15 marks.

Answer ALL questions.

3 Section B consists of 4 questions, each question carries 20 marks. Answer

ANY TWO questions.

4 You will be allowed 10 minutes to go through the paper before the start of the
examination, you may write on this paper but not in the answer book.

5 Begin each answer on a new page.

6 Please write your examination number on each answer book used.

Answer books without examination numbers will not be marked.

7 All persons writing examinations without payment will risk expulsion from the
Institute.

8 If you are caught cheating, you will be automatically disqualified in all subjects
seated this semester.

9 DO NOT open this question paper until instructed to do so.

SECTION A (60 MARKS)

Answer ALL questions from this section.

QUESTION 1

Explain three ways in which an exemption clause can be incorporated into a contract
under common law? (Total 15 marks)

QUESTION 2

Explain and criticize the principle of branch separateness and whether it still applies
today? (Total 15 marks)

QUESTION 3

Capital can be classified in a variety of ways. One division is between secured and
unsecured capital. Unsecured capital can be divided into senior and subordinated
capital. Write notes on subordinated capital (Total 15 marks)

QUESTION 4

Outline and explain any five key elements of a Bank’s Money Laundering
Compliance Programme? (Total 15 marks)

SECTION B (40 MARKS)

A qualification examined by the Institute of Bankers in Malawi

Answer ANY TWO questions from this section

QUESTION 5

X is an exporter of various commodities in Malawi. X has various warehouses in

Malawi and during the 2014-2015 maize season, X bought a lot of maize. As a result
of the drought currently affecting the Southern part of Africa, there is huge demand
for maize and the prices of maize have gone up. X has been approached by Grains
SA, a company based in South Africa, which wants to buy X’s maize. X will make
200% profit. However, he is worried that if he exports his maize to South Africa, he
may not get his payment and does not have the means to sue Grains SA in South
Africa. While travelling to work he hears an advert on the radio about letters of credit
being used to pay for goods which are exported.

Required:

With reference to case law, respond to X’s query as he approaches you as his banker
to explain to him what a letter of credit is and how it can be used to ensure that he is
paid for his maize. (Total 20 marks)

QUESTION 6

a) Instagram Limited is a shareholder of African Bank. It recently injected capital into

African Bank to the tune of MK2 billion in order for African Bank to meet Basel III
requirements which have just been introduced in Malawi. Three months after the
injection, African Bank experienced a bank run and the Reserve Bank of Malawi
appointed a liquidator to liquidate Africa Bank. Instagram Limited is furious and
wants to know if it will be able to recover its MK2 billion.

Required:
With reference to priority of claims, advise whether Instagram Limited will be able
to get its money back. (12
marks)

b) Outline eight powers of a liquidator under the Banking Act 2009.

(8 marks)
Total 20 marks)

QUESTION 7

A qualification examined by the Institute of Bankers in Malawi

a) What is a negative pledge? (5 marks)

b) What are the options available to a Bank against a third party who accepts
security in breach of a negative pledge? (15
marks)
(Total 20 marks)

QUESTION 8

Draft notes on the following concepts:

a) Deposit Insurance (5 marks)

b) Systemic Risk (10 marks)
c) Pari Passu Clause (5 marks)
(Total 20 marks)

END OF THE EXAMINATION PAPER

A qualification examined by the Institute of Bankers in Malawi