‘Monetary policy seeks to restore confidence in banks’

week, Reserve Bank Governor Dr Gideon Gono announced several measures to be implemented by the central bank to ensure bank supervision by the monetary authorities.
The measures include the collaboration of financial sector regulators, deposit protection board, moral suasion for banks to release some idle funds on Nostro accounts as well as the raising of liquidity ratios further from 25 percent to 27,5 percent effective from 1 March 2012.
BancABC group economist Mr James Wadi said the monetary policy measures seek to address the liquidity challenges that have haunted the fragile economy since the last quarter of 2011.
“A piecemeal approach to addressing banking sector liquidity crunch will not achieve the intended results. However, as banks remain trapped in a drawn-out liquidity crunch, this will eventually be perceived to be ‘unsafe and weak’ before spreading to the entire banking system,” he said.
He said another consequence of the present liquidity crisis has been reduced to the productive sectors of the economy and this could scuttle the recovery momentum.
“While the set measures enunciated in the monetary policy will to some extent provide some respite to the banking sector if implemented over a long horizon, the country needs to address the huge mismatch between exports and imports.
“In as much as tobacco inflows tend to alleviate the country’s liquidity problems, deliberate policies that promote export receipts such as diamonds and other mining revenues to circulate in the domestic banking system could also considerably ease the country’s liquidity challenges,” said Mr Wadi.
Zimbabwe National Chamber of Commerce immediate past president Mr Trust Chikohora said the policy statement was good in that it aimed at ensuring the central bank focuses on its core business.
“It is good in that it seeks to mandate the Reserve Bank to focus on its core business which is that of supervising banks in the country.
“By supervising the banks, this will restore confidence in the financial services sector,” he said.
He said the monetary policy statement was quite informative to the public as Dr Gono during his presentation highlighted the banks that have complied with the minimum capital statutory reserves.
“This develops confidence in the banking sector as the public will be aware of the banks to do business with or deposit their money,” he said.
Another economic commentator Mr Peter Mhaka said by coming up with measures such as the lender of last resort, the monetary authorities were trying to reduce liquidity risks.
“Because of gridlocks that previously surrounded the acceptable form of collateral, the lender of last resort window has been rendered inaccessible. As a result, it is imperative to introduce discounted and tradable money market instruments that can be used as collateral by banks intending to be accommodated by the RBZ,” he said.