adminliquidity crunch.
The liquidity crisis was a result of high value and high volume transactions over the festive season against a backdrop of widespread liquidity problems.
Transactions made in December and January included salaries, bonuses and Government’s capital projects, absorbing most of the liquidity in the country.
The Bankers’ Association of Zimbabwe has since presented the Government with proposals on how to reduce effects of the liquidity crisis.
The liquidity crunch caused the RTGS backlog at most banks after they faced serious liquidity constraints that affected their capacity to do RTGS transfers.
Banks debited clients’ accounts before actual transfers were done. The RTGS payments were done in batches under a system commonly referred in banking as straight through process, which links bank branches automatically.
CBZ Bank is one of the financial the institutions that was affected by the liquidity constraints and could not fund RTGS transactions until Friday last week.
The country’s biggest bank processed in excess of US$400 million and this drained the banking sector of most of the liquidity to fund RTGS transfers.
Lack of RBZ lender of last resort function and a dysfunctional interbank market meant banks have no alternative source of funding to cover their obligations.
The RBZ requires over US$150 million to cover banks experiencing shortfalls. Government is struggling to raise requisite funding.
Efforts to get a comment from BAZ president Mr John Mushayavanhu on the state of affairs in the banking sector regarding the RTGS gridlock were unsuccessful. But a CBZ spokesman yesterday said they had started clearing the RTGS backlog and bank expects to have funded all transfers by the end of this week.
“Due to unprecedented high value and high volume transactions associated with both end of year and commencement of the year not all transactions could be pushed through the RTGS system,” said the spokesman.
“We are overwhelmed by the end-of-year payments to the extent the bank processed amounts in excess of US$400 million through the system in the past three weeks, between the end of December and last week.
“We would like to assure our customers that we are now back to normalcy and that the remaining backlog will be completed by end of this week,” he said.
Since CBZ Bank administers Treasury’s main account smaller banks that hold auxiliary accounts for the Government struggled to fund RTGS transfers.
Following the brief RTGS gridlock banks have engaged Government, Treasury and monetary authorities to discuss ways to capacitate the central bank to enable the apex bank to carry its lender of last resort function.
They have also called for the reintroduction of treasury bills and negotiable certificate of deposits to provide instrument banks can use to borrow from each other.
The absence of money market instruments has deprived banking institutions of security they could use to lend to each other to cover shortfalls.
Presently banks are working in silos and not lending to each other due risk inherent in the sector due to the liquidity constraints pervading the economy.
Online Reporter