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Ngoni Dapira Post Correspondent
MUTARE business community has applauded the banking class’s initiative announced by the Reserve Bank Governor, Dr John Mangudya, in his Mid-term monetary review last Monday.Dr Mangudya said the Zimbabwean economy required strong banks that could adequately support the funding requirements of industry.
He said a strong banking sector was critical in the economic recovery process of the economy.
Dr Mangudya said banks should therefore ensure that they build capital bases to levels that provide critical mass necessary to make significant contribution to the economy, which is why RBZ came up with a strategic three-tier segmentation system.
“The system will allow the existence of smaller, profitable banks with strong governance and risk management systems that play a meaningful role in the economy.
“The three segments, namely Tier 1, Tier 11 and Tier 111 for banks’ compliance, are guided on the premise of minimum capital requirements,” said the Central Bank Governor.
Banks in Tier 1 will be required to have minimum core capital requirements of $100 million by 2020 as previously announced. The segment is expected to comprise large indigenous commercial banks and all foreign banks.
These will conduct their core banking activities, and in addition offer other activities such as mortgage lending, leasing and hire purchase that have longer term maturities as well as other sophisticated products.
Tier 11 segment comprises commercial banks, merchants banks, building societies, development banks, finance houses and discount houses that will only conduct their core banking activities.
Tier 11 banking institutions are expected to maintain minimum capital requirements of $25 million. Tier 111 segment, which has a current minimum capital requirement of $5 million, comprises deposit-taking microfinance institutions.
Dr Mangudya said the minimum capital requirement of $7,5 million by 2020 for Tier III banks takes into account start-up costs such as acquisition of Information and Technology systems and the establishment of branches.
The RBZ Governor also announced that all the three-tier banking institutions will be required to submit revised capital plans for December 2020 based on their chosen strategic group by December 31 this year (2014).
Quest Motors managing director Mr Tarik Adam said liquidity constraints were the most detrimental in the country’s economic woes and the banking class’s initiative would help inject capital for businesses.
“If businesses have access to affordable loans they can recapitalise and resume operations. Those in the construction industry need people to access affordable mortgage loans to construct and boost their trade, so it will be a really welcome initiative if we have many banks in Tier 1 to help us in business.
“We are really under pressure as big businesses in the manufacturing sector especially for us players in the motor vehicle assembling industry. We need the liquidity crisis to be dealt with as soon as yesterday,” said Mr Adam.
Zimbabwe National Chamber of Commerce Manicaland vice-president and managing director of Mutare Merchants Mr John Mano said as business they were expecting initiatives and policies that would achieve concerns on cash inflows into the country, which the Central Bank Governor successfully tackled.
“The liquidity crisis is our biggest challenge for business. We need banks to be capacitated for the re-capitalisation of key industry to increase production and create employment.
“We also need regulatory measures to promote cash circulation in the country rather than out through imports of which Dr Mangudya tackled all these issues,” said Mr Mano.
Business consultant Mr Takunda Mariga said restoring confidence in the banking sector was pivotal as the economy pushes for plastic money.
“We are heading for a new economic era in the world and for us to be a part of that we have to have a strong banking sector. A cashless society just like in the developing countries is inevitable, but we need to restore confidence in the banking sector of which the three-tier system is a step in the right direction to push the plastic money initiative,” said Mr Mariga.
The RBZ Governor also announced that the African Export Import Bank (Afreximbank) interbank market facility of US$100 million was earmarked to be operational between end of August and mid-September 2014.
This facility is expected to go a long way to supplement the current bilateral like-minded intermarket trades taking place in the financial sector.
On the issue of non-performing loans, the Governor said Cabinet had approved the establishment of a National Special Purpose Vehicle known as Zimbabwe Asset Management Corporation (Pvt) Ltd.
ZAMCO will be mandated to acquire NPLs from banks in order to clean up and strengthen banks’ balance sheets and provide them with the liquidity to fund valuable projects for the economy to rebound.
The Central Bank Governor added that to deal with the increasing problem of multi-banked clients who have become serial defaulters with NPLs at several banking institutions, RBZ would soon set up a Credit Reference Bureau.
The CRB will assist banks not to incur new bad loans, as there would be adequate knowledge about the borrowers in all banks countrywide.
The RBZ chief, however, added that in order to provide for the implementation of the CRB system, the Banking Amendment Bill shall be gazetted to provide for the issuance of regulations governing the licensing and supervision of credit reference bureaux and establishment of a credit information data.
Online Reporter