Democrats accuse govt of ‘destroying’ corporate governance code

The opposition party, Democrats have accused the Maldivian administration of “destroying” the corporate governance code by pressuring the Bank of Maldives (BML) into reversing its decision on card limits for foreign transactions, adding that the move has resulted in loss of faith in BML among Maldivian citizens and the global community.

On Sunday morning, the national bank suspended foreign transactions for existing debit cards, as well as new debit and credit cards linked to MVR accounts. It also lowered the monthly limit for standard and gold credit cards to USD 100.

But it reversed the decision within hours, based on instructions from the Maldives Monetary Authority (MMA).

In a press briefing held at the President’s Office on Sunday evening, top government officials said the bank changed the card limits in violation of explicit instructions by President Dr. Mohamed Muizzu not to make such a change.

Ilyas Labeeb, a top official from the Democrats, told reporters on Monday that the BML had been repeatedly sharing concerns with the MMA over the shortage in US dollars available for purchase and asking for a solution since April last year.

He alleged that the government had deliberately ignored the appeals.

Ilyas also accused the government of exerting undue influence on the BML, forcing it to reverse its decision.

“The government ignored this. The MMA ignored this. The bank finally decided that they can’t sustain it. We are seeing the President order and try to run an independent and autonomous bank, a bank that the government owns shares in, like a government department,” he said.

Ilyas said that the move has resulted in loss of faith in the bank by its customers, especially its international partners.

He said that the government destroyed the Banking Act, the Companies Act, and the corporate governance code.

He warned that the Maldives will feel the effects of the resultant loss of faith in the Maldives’ financial sector in the coming days.

Ilyas said that BML’s corporate decisions must be made by its board. He called on the government to stop interfering in the bank’s decisions at President Muizzu’s direct instructions.

He accused the Governor of MMA, Ahmed Munawar, of acting like one of the bank’s managers. He said that MMA is just the bank’s regulator, and cannot overstep.

Ilyas said the government should instead focus on boosting revenue streams, especially US dollar revenue streams, and cut costs.

“The bank took action so it can keep standing; to save the bank, to save foreign currency, and to save the money of the Maldivian people. They needed to take that decision in that moment. And it was delayed for far too long,” he said.

In its original statement announcing the changes to card limits, BML said it was compelled to make the changes because the card usage is much higher than foreign currency it is able to purchase – impacting the bank’s ability to provide foreign currency support to its business customers.

BML’s CEO and Managing Director Karl Stumke said that while the bank purchased approximately USD 60 million in foreign currency from customers this year, the card usage is threefold higher than that.

He said that the card usage impacts the bank’s ability to provide foreign currency support to its business customers.

“…and we have this anomaly where the bank provides 75 percent less foreign currency to the economic sector than we do for discretionary spend on cards dominated by travel and online shopping,” he said. “We have to get the mix correct and ensure we are not squandering a scarce resource.”

Stumke said that the bank has an obligation to protect its depositors and therefore cannot continue to sell more than it is able to purchase.

He acknowledged that the changes will have a significant impact on the bank’s customers, but said the bank expects it to be temporary.

“We have not taken this decision lightly but have been compelled to take action to ensure we can continue to provide the necessary support for essential economic activities,” he said.

With the reversal of the decision, the limit for foreign transactions on debit and credit cards is back to USD 250 per month, with a higher limit of USD 750 for Maldivians residing overseas.