DAR ES SALAAM (Reuters) - Tanzania’s National Bank of Commerce Ltd has been fined 1 billion Tanzanian shillings ($435,000) for failure to establish a data center in the East African nation, the second bank in two months to be penalized for such a breach by the central bank.
The central bank directed banks and financial institutions in 2014 to establish primary or secondary data centers in the East African nation, warning of hefty fines for non-compliance as it tightened regulatory oversight of the sector.
The country’s financial services sector has been hit by a spike in bad loans, which have stifled the growth of credit to the private sector.
The central bank fined Diamond Trust Bank Tanzania Limited 1 billion shillings last month for breaching the regulatory rules on data and service availability.
It issued a new directive last week that all banks and financial institutions must now establish a primary data center within three months or face an increased fine of 5 billion shillings.
“The Bank of Tanzania (BoT) has imposed a penalty charge of one billion shillings to National Bank of Commerce Limited (NBC) for failure to implement directives to establish either a primary or secondary data center in the country,” the central bank said in a statement sent to Reuters on Thursday.
It said the rules were aimed at ensuring banks’ operations when they are cut off from accessing data centers of parent companies located outside Tanzania.
“The Bank of Tanzania has noted with serious concern that NBC did not implement the directive for establishing a secondary data center in the country, despite confirming in writing that it has implemented the directive,” it said.
“In addition to the penalty explained above, additional charge of 10 percent of the penalty amount will be imposed to
NBC for every month in which the non-compliance continues.”
NBC, majority owned by South African lender Absa, was not immediately available for comment.
The central bank said it has issued three previous circulars to banks and financial institutions since 2014 on the requirement for primary or secondary data centers to be located in Tanzania instead of on servers abroad, but some lenders were yet to comply.
Reporting by Fumbuka Ng'wanakilala; Editing by Omar Mohammed and Emelia Sithole-Matarise