Gono gets tougher on banks

saw all bids rejected as the banks demanded high interest rates.
On the third auction held on October 26, the Government allotted bids worth U$9,85 million and Tuesday’s US$30 million offering of 91-day bills attracted US$8,65 million worth of bids, with yields ranging between 8,5 to 12 percent.
Before this week’s sale, Government had given the banks their “last chance” to support the T-Bills, or be compelled to do so through negotiable certificates of deposit.
In response to a series snubs of the T-Bills by the banks, Reserve Bank of Zimbabwe governor Dr Gideon Gono said yesterday the authorities had been left with no option but to intervene through the introduction of fiscal and monetary instruments that would force banks to subscribe to the T-Bills.
But he could not give a timeframe as to when such measures would be put in place.
“While it is true that an eye for an eye leaves the world blind and love begets love,” he said, “a series of the snubs of the nature we have all witnessed from the players in the financial sector — snubbing the very authorities who have been bruised by verbal shrapnel of the nature we have all been witnesses to — the unstrategic action can only invite a beget of snubs as well. 
“We have many options to play, which include the introduction of perfectly legal and legitimate fiscal and monetary instruments in the market whose uptake may be non-negotiable or non-optional.
“Finance Minister Tendai Biti and both the Reserve Bank board and RBZ monetary policy committee and myself, as the governor, have not been terribly in favour of the concept of regulating upper or lower interest levels, bank charges and statutory reserves, preferring rather operation of market forces.
“But where markets fail, as in our case, because certain people are holding certain negative attitudes towards us and the country and the same people are blind in imperatives of necessity and survival . . . and where some people who influence markets are also paying a deaf ear to our efforts towards constructive engagements and moral suasion efforts and are blind to dangers of selfishness, authorities are left with no option but to intervene decisively and give guidance to the market.
“Our civility and persuasive approach of the past may have been misconstrued and imply absence of the policy instruments and lack of decisiveness. Nothing could be further from the truth. Extraordinary situations call for extraordinary interventions.”
Minister Biti last week said he give the banks the last chance to support the paper.
“I am giving the banking sector the last chance to fully support the Treasury bills,” he said. 
“If they don’t support it, I will issue NCDs (negotiable certificates of deposit) — and that’s it,” said Minister Biti. NCDs are a form of a savings instrument issued by banks for big deposits and are transferable and therefore tradable in the secondary market.
In its monthly economic review, the African Development Bank said banks remained sceptical about the Government’s ability to honour its debt.
“It seems that banks do not share a similar view relating to the low risk associated with (T-bills),” said the AfDB.
“The outcome of the tender suggested that most banks think the risk level is not low, contrary to the views of the authorities. This is against the background of tight budgetary constraints and the uncertain political and economic environment.”
A Harare-based economist said it was unlikely that the T-Bills would attract significant takers in future because of Government creditworthiness which “is in shambles.” Traditionally, T-Bills are seen as safe investments options and institutional investors normally buy them.
While Treasury has not indicated where proceeds from the TBs would be used, Government has been battling to secure funding for key projects, such as infrastructure rehabilitation and support to agriculture due to pressure on the budget.
It was expected that the success of the TBs would help revive the country’s dormant interbank market, which has seen banks being reluctant to cover each others’ daily shortfalls.