adminNgoni Dapira Business Correspondent
ECONOMIC analysts have applauded the Central Bank’s initiative to clean up undercapitalised banks to achieve its drive to restore confidence in the banking sector.This follows the Reserve Bank of Zimbabwe’s de-licensing of Afrasia Bank, formerly Kingdom Bank, on Tuesday.
The parent company, Afrasia Bank Limited of Mauritius, failed to re-capitalise in accordance with the RBZ minimal capital thresholds by December 31. This was in line with the extended 2020 deadline for full recapitalisation of all banks.
The closure of Kingdom Bank follows just a month after the de-licensing of another local bank, Allied Bank, by RBZ on January 8 after the bank had voluntarily surrendered its banking licence.
The Central Bank Governor, Dr John Mangundya, last month said apart from the incumbent working capital limitations, poor corporate governance was also a major detriment in the collapse of the country’s banking sector.
Dr Mangudya revealed that RBZ had launched a programme to remove all the distressed banks that he referred to as ‘‘bad apples’’ in the financial services sector.
He said the programme was expected to be complete within the next six to 12 months.
Economic analyst, Mr Tendai Mukarakati, said bank failures in Zimbabwe over the past 10 years had affected people’s confidence in the banking sector.
He said the situation of weak capitalised banks was affecting Government attempts to restore banking confidence in the country since dollarisation.
“The market wants reassurances that appropriate measures are in place to guard against banks that do not meet the new capital requirements by 2020.
“This will ensure the safe exit of undercapitalised banks from the sector and the protection of creditors and depositors’ funds.”
Another economist, Ms Ashley Chikodzore, called for the merger of troubled indigenous banks in the wake of the liquidity crisis threatening the survival of undercapitalised banks in the country.
Other economists held that the role of the Deposit Protection Corporation to provide depositors insurance schemes in the event of bank failures was too low and not assuring enough to depositors.
The DPC only offers small depositors $500 each upon the closure of a bank, while the rest of the balances in their accounts will be given subsequent to the liquidation of the bank.
As of last year, Zimbabwe had 19 working commercial banks, but now has 17. Economic analysts, however, said the number was still unnecessarily high for a country burdened with liquidity constraints and an increasingly shrinking banking sector confidence.
Dr Mangudya last year in his Mid-term Monetary Review introduced banking class initiatives citing that the economy required strong banks that could adequately support the funding requirements of industry.
He came up with a three-tier segmentation system for banks’ compliance guided on the premise of minimum capital requirements by 2020.
Banks in Tier I will be required to have minimum core capital requirements of $100 million, Tier II banking institutions should maintain minimum capital requirements of $25 million and Tier III segment which comprises of deposit-taking microfinance institutions has minimum capital requirement of $7,5 million.
Dr Mangudya said all the three-tier banking institutions were supposed to be recapitalised by December 2020 but all banks were required to submit revised capital plans by December 31, 2014.
Online Reporter