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week for the outgoing Reserve Bank of Zimbabwe deputy governors that the amendments had been necessitated by the need for measures to deal specifically with challenges faced by banks.
He said following the ReNaissance Merchant Bank saga, there was a need to craft laws to deal with such scenarios.
“After the exposure of Renaissance, the bank was placed under curatorship and it was connected to a number of companies and there was no law to deal with these companies,” he said.
“In the event that the bank collapses we should have the power to freeze all the companies associated with it,”
RTG and First Mutual Life, a subsidiary of Afre Corporation, were affected by the exposure of Renaissance, resulting in the Insurance and Pension Commission investigating FML.
Minister Biti called for the harmonisation of IPEC, the Securities Commission of Zimbabwe and the Zimbabwe Stock Exchange.
To that effect, the ministry was also working on the Reserve Bank Assumption Bill and amendments to the Securities Commission Act. The RBZ Assumption Bill seeks to deal with the central bank’s debt, estimated at US$1 billion. The minister said during the same period, Government was looking forward to making Victoria Falls an offshore zone.
Meanwhile, the RBZ will soon convert the US$83 million it owes banks in statutory reserves into tradable paper that the institutions can use to borrow money.
The RBZ used financial institutions and other stakeholders’ money during the economic crisis immediately preceding the formation of the inclusive Government.
The discounted and tradable paper will serve as the security that was lacking for banks to get overnight accommodation from the RBZ and the interbank market.
The new law also seeks to enhance separate insolvency regimes for dealing with failed banking institutions.
The proposed laws cover corporate governance and compliance, troubled bank resolution and consolidated supervision.
Meanwhile, the central bank has instituted a comprehensive financial disclosure framework, which ensures that accurate, meaningful, transparent and timely information is provided by borrowers to investors and creditors. Proposals by the central bank come at a time when the financial sector is facing numerous challenges, although it has remained stable since dollarisation.
The prevailing liquidity risk has exposed many banks still dealing with liabilities incurred during the past 10 years of economic depression.
Liquidity risk is the risk a financial institution encounters in meeting the obligations of its financial liabilities and often arises from the fact that assets and liabilities have differing maturity periods.
The banking system remained vulnerable with weak capitalisation, rising non-performing loans and a tight liquidity situation.
Online Reporter