2014 Monetary Policy Statement

 

1230: Fidelity establishing gold buying centres in all gold producing areas.

1229: Banks to simplify account opening requirements.

1228: RBZ has introduced new currencies that include Australian dollar, Chinese yuan, Indian rupee and Japanese yen on top of the currencies that have been used before.

1225: Banks should provide RBZ with reasons to justify interest and charges increases before receiving approval from the central bank.

1224: RBZ is also lobbying for establishment of commercial crimes court.

1223: No loans shall be granted to insiders and related interests except in cases where the service is available to all other employees to avoid non performing  loans. Workers of banks can access loans from other banks.

1221: RBZ finalising legal framework for credit reference bureaus.

1219: Banks should submit capitalisation plans to RBZ by June 31. Banks with a weak capitalisation were urged to consider mergers to improve their financial positions.

1216: Bank capital requirement levels mantained at same levels but RBZ has extended the deadline to December 31 2020.

Co-acting Reserve Bank of Zimbabwe Governor Dr Charity Dhliwayo will this morning present the 2014 monetary policy statement expected to address issues of banking sector stability than improving the liquidity situation.

 

Financial analysts expect the monetary policy, to be presented around mid morning,  to dwell more on issues of capitalisation, interest rates, charges, lending rates and non-performing loans.

Little is expected in terms of measures to improve liquidity considering the central bank does not have financial resources for the lender of last resort function.

This is because RBZ is not printing local currency as the country uses a basket of foreign currency since suspension of the local unit in 2009 due to hyperinflation.

Since the RBZ does not print money the interbank market has not been functional and this has resulted in high interest rates as banks try to maintain safe positions.

Government is working on a US$100 million package expected to come from a regional development bank as part of efforts to revive the interbank market.

Most financial institutions charge high rates as part of the risk premium associated with an illiquid economy while they also try to avoid short positions by limiting exposure resulting from overnight accommodation of other banks.

There also is speculation about the possibility that the RBZ might come with adjusted compliance deadline regarding the US$100 million capital threshold. Customers have been the biggest losers as weak banks struggled.

The apex bank is also worried about the high level of non-performing loans and needs to find ways to address them to avoid their negative impact on banks.

Calls have also been made for reintroduction of a framework governing interest rates, charges, savings rates and lending rates, which observers feel have largely been in favour of banks at the expense users of banks’ services.