adminWhenever signs of problems in the financial sector are detected it is important to communicate such issues promptly and with clarity so as to reassure economic players lest depositors and investors panic and worsen an already bad situation.
We are happy that the Reserve Bank of Zimbabwe has stepped in and raised minimum capital thresholds for banking institutions to restore stability to the sector following the recent closure of three financial institutions.
Genesis and Royal banks surrendered their licences after their failure to meet the minimum capital requirements that were pegged at $12,5 million then. Interfin, another financial institution, was placed under curatorship.
Presenting the Mid-Term Monetary Policy Review Statement on Tuesday, Reserve Bank of Zimbabwe Governor Dr Gideon Gono said commercial and merchant banks would be required to have minimum capital of $100 million from $12,5 million and $10 million respectively.
Minimum capital requirements for building societies have also been raised from $10 million to $80 million, while finance and discount houses had theirs raised from $7,5 million to $60 million and micro-finance institutions should have $5 million, up from $1 million.
Full compliance is expected by December 2014 though the financial institutions need to adhere to the timelines given by the RBZ to be 25 percent, 75 percent and eventually 100 percent compliant.
We would like to applaud the RBZ for its intervention and the gradual implementation plan to allow the banks to build up their capitalisation levels while also calling on the institutions to work towards meeting these requirements for their good and their customers’. It is important to protect depositors’ interests and also restore confidence in the financial sector though we believe constant dialogue between the central bank and banks would be crucial in ensuring that a healthy financial sector is nurtured.
“The increase in minimum capital levels for banking institutions has been necessitated by the dynamic nature of the financial landscape, regulatory requirements, increase in competition and economic uncertainties, which has placed an unprecedented pressure on banks to be adequately capitalised,” said Dr Gono.
While efforts are under way to restore public and investor confidence in the country’s financial sector, we would like to urge financial institutions to adhere to ethics and be disciplined in their operations since the RBZ has observed that problems in the sector were coming at a time when financial impropriety that dogged the sector in the last round financial sector challenges was re-emerging.
It is important though that as we confront and formulate remedies to the challenges facing the nation we do not over-magnify our challenge but proffer solutions instead of constricting our hopes through the creation of a crisis colossus in our minds. Let us have solutions instead of the lofty descriptions of how bad our situation is since that does not in any way improve our economic situation.
Online Reporter