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soundness of the entire financial sector rather than individual banks a senior official with the bank has said.
The bank’s chief examiner, bank licensing, supervision and surveillance, Mr Gift Chirozva, said sickly financial institutions should be given a chance to continue in existence as a way of building confidence in the financial sector.
“Decisive action on failed banks may not necessarily build up confidence in the sector as those struggling might conclude that they will close shop,” said Mr Chirozva.
Mr Chirozva was responding to questions during the Institute of Bankers Winter School in Nyanga last week on why central bank governor Dr Gideon Gono had declared the financial sector safe and sound before the Renaissance Merchant Bank saga.
He added that the central bank, as the regulator, was not “sleeping on the wheel” as assumed by many saying the bank was fully aware of what was going on at RMB.
Financial regulation has remained essential for financial and economic stability.
The International Monetary Fund had indicated rising banking sector vulnerabilities, while some local reports saw the return of the 2004 era of bad governance characterised by insider dealing and inadequate capitalisation.
The market was also seeing the sector as fragile and unstable due to poor corporate governance, risk management, abuse of depositor funds and disregard of prudential laws.
It had emerged that eight smaller banks were undercapitalised and could fail to comply with the central bank minimum capital require- ments.
Capital adequacy deadline was set for June 30, 2011. Capital requirement is a buffer against contingency risk and cushion for depositors against unforeseen or identified risks.
As the central bank ruled out any possible bank closures some banks are understood to have asked for extension to recapitalise operations.
Dr Gono has since indicated that the deadline would be extended.
Commercial banks are expected to increase their capital bases to US$12,5 million while merchant banks need US$10 million. Building societies were expected to have US$7,5 million as of June 30, 2011.
Mr Chirozva said to continue building confidence in the financial sector the central bank would continue to enhance the fitness and proper assessment criteria.
He said banks occupy a pivotal role in the economic process and any problems experienced in the sector have profound effects on the real and service sectors of the economy.
Stability in the country’s financial sector will ensure depositor and investor protection, safety and soundness of financial institutions, promote confidence in the sector and promote full disclosure and good governance.
Online Reporter