admin
In his mid-term fiscal policy review, Finance Minister Tendai Biti announced that Government had already approved the setting up of the central bank’s $150 million lender of last resort fund.
The fund aims to deal with liquidity requirements of banking institutions.
“The challenge is now on identifying private investors and also establishing strong safeguards on accountability and governance of the fund.
“The fund’s objective is to deal with emergency liquidity requirements of fundamentally solvent entities,” he said.
Economic analysts have called for the resuscitation of the RBZ’s lender of last resort function to address the liquidity crisis in the banking sector.
Minister Biti said to complement the fund, Government was also working on amending the Banking Act as well crafting the troubled and insolvent bank resolution framework.
“The framework will incorporate provisions for prompt corrective measures and deal with issues of corporate governance.”
He said consistent monitoring of the banking sector was a prerequisite for maintaining relative soundness of the financial services industry.
“The Reserve Bank on its part will strengthen its financial regulatory and supervisory framework of the banking sector as a prerequisite for maintaining relative soundness of the sector.
“The completion of the restructuring of the Reserve Bank will be key to the process of strengthening the banking sector. In this regard, the Reserve Bank supervision will continue to draw from international best banking practices,” he said.
Despite the liquidity crunch, he said, the economy continues to over-rely on use of cash even for high value transactions of as much as $5 000.
He said the availability of Points of Sales and their utilisation remained low giving rise to high value transactions in cash.
“This practice perpetuates the liquidity challenge and draws back the country from modern global transactions initiatives on use of plastic money as well as electronic banking,” said Minister Biti, adding that Government was again calling on the financial sector and the business community to cooperate in promoting the use of plastic money.
Online Reporter