OPINION | Finance Bank Ruling: Are We Paying for a Reality That Never Existed?

There has been a lot of excitement and anger after the recent court ruling on compensation linked to the closure of Finance Bank in 2005. Many people are treating this as a simple matter of “the bank was closed unfairly, so just pay them.” Finance Bank was not closed for small mistakes. It was shut down by the Reserve Bank of Malawi (RBM) over serious regulatory problems.

According to official reports, including from KPMG, the bank was: These were not technical errors. These were issues that threatened the integrity of the entire financial system. After RBM revoked its licence, a court allowed a judicial review.

But crucially, the bank itself later chose to go into voluntary liquidation. It was not forced. That decision matters.

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In 2013, the same owners returned with New Finance Bank. Same leadership, same people. But this “reborn” bank lasted less than five years before collapsing under heavy losses.

Eventually, 100% of its shares were taken over by Nedbank, which later became Centenary Bank. In simple terms: when given a second chance under normal conditions, the same management failed again. If Finance Bank had not been closed in 2005, is it guaranteed that it would still be making profits in 2026?

Or is it just as likely that it would have failed anyway, like its successor did? The compensation being discussed is based on “lost future profits” — meaning the court is assuming the bank would have grown successfully for 21 straight years. That is a very big assumption.

Many well-run banks struggled during these times. Some collapsed. So why are we pretending Finance Bank would have survived everything perfectly?

In finance and law, this kind of compensation is called counterfactual profit — money based on something that never actually happened. And experts usually argue fiercely about how such profits should be calculated, because they are highly uncertain and easy to exaggerate. Yet here, Malawian taxpayers may be forced to pay billions based on a story that has no solid proof.

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