RBZ softens on struggling banks

Harare Bureau
THE Reserve Bank of Zimbabwe has advised banks that are struggling to meet the minimum capital requirements to downgrade and obtain deposit taking micro-finance licences.The central bank on Wednesday raised minimum capital requirements for micro- finance institutions by 100 percent to $20 million saying such institutions should be compliant by 2020.

This is significantly lower than $100 million that commercial banks and building societies should have as minimum capital by 2010. Acting RBZ governor Dr Charity Dhliwayo expressed concern over failure by some banks to provide credible recapitalisation plans.

“The Reserve Bank has observed that some banking institutions have capitalisation plans which lack credibility and substance and seem to be designed, in some cases, to buy time,” said Dr Dhliwayo. “Notably, some banks are taking years to finalise their capitalisation.”

Dr Dhliwayo also noted with concern that some banks were reluctant to implement viable options at their disposal such as consolidate operations or merging.

“Further, we have noted with concern that there are some banking institutions that are reluctant to consolidate their operations or merge with other institutions where this is considered to be a viable option,” she said. “Banking institutions are required to ensure finality in the implementation of their capitalisation plans in a timely fashion and not wait for their condition to deteriorate to a point of no return.”

Banks should also consider selling part of their shareholding to foreign partners. However, potential suitors are not interested in investing money in banks with serious challenges.

Dr Dhliwayo said where a banking institution has failed to resolve its challenges, the Reserve Bank will institute appropriate supervisory action. She said banking institutions should adopt robust corporate governance policies, and practices commensurate with their risk profile.

“The Reserve Bank, in conjunction with the Ministry of Finance and Economic Development, are proposing amendments to the legal and regulatory framework to promote effective resolution of troubled banks,” said Dr Dhliwayo.