adminapproach” to the issue after discussions with and submissions made to the apex bank.
BAZ executive director Mr Sij Biyam said while banks were alive to the need for well capitalised banking entities they were hoping for “the best approach” to the issue in view of the liquidity crisis pervading the economy.
He made the remarks in an interview with Herald Business during which he also announced two senior appointments for senior economist and advocacy and marketing executive made by the association.
“We have been talking to the RBZ on various challenges the banking sector and the entire economy are facing and we have put proposals. We hope he (Governor) will respond (to the proposals),” Mr Biyam said.
It is not clear yet when Dr Gono will present the Mid-Term Monetary Policy Review Statement before or after the harmonised elections scheduled for the end of this month.
Presenting the Mid-Term Monetary Policy Review Statement last year, the RBZ Governor said commercial and merchant banks would be required to have minimum capital of US$100 million by 2014 from US$12,5 million and US$10 million respectively.
Minimum capital thresholds for building societies were raised from US$10 million to US$80 million, finance and discount houses from US$7,5 million to US$60 million and US$1 million to US$5 million for micro-finance institutions. The respective banks should be fully compliant by June 2014, but should have met 25 percent of the new capital levels by the end of this year.
Commercial banks would have to raise their minimum capital requirements by US$12,5 million by the end of this year. The financial institutions are required to be 75 percent and 100 percent compliant by December 31, 2013 and June 30, 2014 respectively.
But the BAZ director pointed out that banks were not calling for extension of the compliance deadlines, but needed a few issues reviewed by the regulatory authorities.
In the face of challenges the economy and companies are facing with regard to liquidity and capital banks have called for an agreement on the best way to handle the need to ensure that banks get well capitalised.
This comes at a time it is becoming increasingly clear that some smaller financial institutions may struggle to meet the phased minimum capital requirements or even attract cash-rich investors.
However, Dr Gono says higher bank capital thresholds were critical to achieving a sound financial system.
Addressing bankers last year after an appeal by the by some members of BAZ for reduction of capital thresholds to about US$20 million for commercial banks by December 2013, Dr Gono said there was a positive correlation between higher capital levels and profitability, bank charges, credit extension and confidence.
“A low capital base restricts a banking institution’s capacity to underwrite sufficient business and generate enough revenues to meet its operational costs,” he was quoted as saying then.
Online Reporter