‘Lift RBZ immunity’

Harare Bureau
PROMINENT lawyer and businessman Mr Sternford Moyo says there is need to remove immunity of the Reserve Bank of Zimbabwe to inspire confidence in the central bank.Mr Moyo made the remarks in his presentation at the four-day Institute of Bankers of Zimbabwe Summer Banking School that ended in Nyanga last Friday.

The Harare lawyer was presenting a paper on the challenges faced by Zimbabwe and possible solutions the country could consider to foster economic growth and development.

“The immunity does not assist in enhancing confidence in the central bank. In any event, as was found by the Constitutional Court of South Africa, immunity may not be constitutional.”

The Scanlen and Holderness senior partner and Stanbic Bank chairman said few institutions would be inspired to deal with a central bank that is in not liable to prosecution.

His remarks come in the wake of a recent Supreme Court judgment against Standard Chartered Bank after it was sued by a Chinese firm over $47 739 taken by the RBZ while in a Chartered Bank account.

The central bank took away foreign currency balances held by various companies at the height of Zimbabwe’s economic crisis in 2007 and since that time it has not been able to replace the funds.

According to the RBZ, the money was taken to fund critical national obligations at a time the economy was haemorrhaging due to the effects of illegal and unjustified Western sanctions.

But companies and institutions that lost foreign currency balances held with local banks cannot directly sue the central bank due to its immunity granted by Government to protect its assets. While the RBZ is immune from execution it remains liable for the debts.

Government moved in swiftly to cushion the central bank from a flurry of potential legal suits companies were mooting, which would have resulted in haphazard grabbing of assets.

Immunity of RBZ saw China Shoguang successfully sue Standard Chartered Bank for that money was taken away from its foreign currency account, something that is feared could spark a series of similar litigations against banks in a move that could destabilise the banking sector.

Mr Moyo said Government needed to lift RBZ immunity to enhance confidence in the central bank and move quickly to find a solution to resolve the issue of money it took away in 2007.

Mr Moyo also pointed out that, to enhance confidence, it will be necessary for Government to capitalise the central bank to enable it to resume its lender of last resort function.

The RBZ is presently incapacitated to intervene in the market in terms of influencing liquidity and interest rates due to the lack of financial resources since it is not printing money.

Zimbabwe has been using a basket of currencies since adopting the multi-currency system in 2009 that is dominated by the greenback and also listed as firms’ reporting currency.

Tight liquidity in the local market has resulted in high interest rates, death of the interbank market and high bank charges as banks cannot have fallback position either on the RBZ or each other, which enables them to access overnight funding when they are short.

Market analysts say this has created inefficiencies where banks keep stashes of money to create a buffer to avoid shortages, which drives the cost of money as they try to make up for the money that they hold as a buffer and are never able to invest to generate returns.

In addition, banks are having to incur significant costs of importing foreign currency from the US and also transport soiled notes to the same country due to the liquidity crisis in Zimbabwe.