New law to rein in banks on cards

2013 National Budget presentation in Harare, saying no country could develop without capacity to mobilise domestic savings.
The banking sector has over the years drawn sharp criticism for failing to create an enabling environment to encourage savings since the introduction of the multi-currency regime four years ago.
Minister Biti said the financial services sector was now in a generally healthy state, but there were procedural and structural issues that needed to be addressed.
These included under-capitalisation of some of the smaller banks, corporate governance issues, corrosively high interest rates, absent or meaningless rates on deposits, high bank charges, low rates of financial inclusion, understated supervision and surveillance and limited capitalisation of e-banking and ICT platforms.
Minister Biti bemoaned the absence of the Reserve Bank of Zimbabwe’s lender of last resort facility.
He also accused foreign-owned banks of not having a developmental mindset.
“Recognising the centrality of the financial sector in any capitalist economy, we have in the last three years let the status quo prevail, but clearly the fundamental distortions in the financial services sector demand regulatory action if we are to protect innocent depositors and the sector from its parochial short-termism and lack of strategic thinking. Where there is market failure, regulatory intervention is inevitable,” he said.
Minister Biti said amendments would be made to the Banking Act to address corporate governance issues, limiting individual shareholding in a financial institution and various other compliance issues.
The legislation would also provide for the appointment of a banking ombudsman. In addition, a credit bureau would be established, he             said.
On interest rates, Minister Biti observed that there was a huge discrepancy between deposit and lending rates as banks failed to award positive incentives for savings. 
He said this pointed towards market failure as they continued to lend at unsustainable rates.
“Moral suasion efforts by both Treasury and monetary authorities to have banks cultivate a savings culture among depositors and to price their loans and advances at sustainable rates have not yielded results,” said Minister Biti.
“In this country, depositors actually lose money by depositing it as savings with financial institutions.”