‘Royal Bank can reopen if . . .’

directors Mr Jeffrey Mzwimbi and Mr Durajadi Simba have been barred from presiding over the affairs of the financially troubled bank.
“Reopening of the bank is contingent upon recapitalisation of the bank’s board and senior management and compliance with provisions of the Banking Act (Chapter 24:20), Banking Regulations S.I 205 of 2000 and all regulatory directives,” said Dr Gono.
Royal Bank was closed last Friday after it voluntarily surrendered its licence because it had failed to raise minimum capital to regulatory thresholds.
“Royal Bank chief executive Mr Mzwimbi and executive director (banking) Mr Simba shall be required to step down from management in line with sound corporate governance, which require separation of ownership and management,” said Dr Gono.
He said in the absence of immediate injection of capital and a remedy of serious corporate governance weaknesses, operation of the bank in its current state was detrimental to the banking sector.
Recent onsite investigations by the central bank had unearthed a number of financial improprieties allegedly perpetrated by the bank’s directors.
The bank had been involved in abuse of depositors’ funds and was burdened by non-performing insider loans among several operational irregularities.
It becomes the third bank to fall in as many months.
RBZ’s onsite examinations discovered that 99,2 percent of the bank’s loan book US$1,52 million was non-performing including all exposures to related parties.
Reflecting the bank’s liquidity challenges was its inability to meet depositors’ requirements. The bank had imposed daily withdrawal limits of a paltry US$50.
Royal Bank was reissued with a licence two years ago. It had a capital base of US$1,9 million against the requisite US$12,5 million for commercial banks and cumulative losses of US$6 million to June 2012.
The institution failed to maintain prescribed minimum amounts of capital and reserves in violation of the Banking Act and has failed to conduct banking business in accordance with sound administrative and accounting practices and procedures, adhering to proper risk management policies.
The bank’s closure falls hard on the heels of Interfin Bank’s placement under curatorship and Genesis Investment Bank voluntary surrender of its banking licence after failing to meet minimum capital thresholds.
Royal Bank was founded in 2001 but three years later, the central bank closed it together with Barbican Bank and Trust Banking Corporation for engaging in non-permissible activities. The banks were later merged, to form Zimbabwe Allied Banking Group.
In September 2010, the RBZ re-issued the commercial banking licences of the three banks and Royal Bank re-opened in February 2011, but struggled to raise the US$12, 5 million minimum capital requirement.