admin
Oliver Kazunga Acting Business Editor
THE Reserve Bank of Zimbabwe (RBZ) has urged banking institutions facing operational constraints to take concrete steps towards recapitalisation amid concerns that potential suitors are reluctant to inject funding into a bank with serious challenges. Of late, the central bank has observed that some banks were facing challenges including undercapitalisation, high levels of non-performing loans, poor earnings performance and liquidity constraints.
Capital requirements for banks remain at present levels of $25 million for commercial banks, $25 million for merchant banks, $20million for building societies, $15million for discount and finance houses and $5 million for microfinance banks.
Presenting the 2014 monetary policy statement last week, RBZ acting Governor Dr Charity Dhliwayo stated that they have observed that some banks have capitalisation plans which lack credibility and substance and seem to be designed, in some cases, to buy time.
“Notably, some banks are taking years to finalise their capitalisation.
“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.
She challenged banks to put 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.
“In view of the foregoing, the Reserve Bank will expect banking institutions facing challenges to immediately take concrete steps towards the implementation of the following to consolidate and or merge, dilution of shareholding by potential investors, and converting their banking licences to deposit taking microfinance institutions (microfinance banks).”
Dr Dhliwayo said where a banking institution has failed to resolve its challenges, the central bank would institute appropriate supervisory action.
The RBZ 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.
Meanwhile, Dr Dhliwayo said the growth in non-performing loans within insider loans was a worrisome development.
As of December 31, 2013, she said the level of total insider loans in the banking system was $175,3 million (including Interfin).
“Of these insider loans $117,4 million (66,97 percent) was non-performing. The growth in non-performing loans within insider loans is a worrisome development.
“Previously, the Reserve Bank would net out insider loans from banks’ capital. This measures, however, was not effective in deterring banks from extending insider loans,” she said.
On the back of such negative development, Dr Dhliwayo said with immediate effect among others, no bank shall grant loans to insiders and related interests (as defined in the Banking Regulations, Statutory Instrument 205 of 2000) except where such credit is granted as part of the employees’ conditions of service and is available to other employees.”
She added that individuals and companies may, however, access loans from other banking institutions where they are not classified as insiders or related parties.
Banks boards are now required to review the existing levels of insider loans, ensure adequate provisioning and report insider loans to the central bank.
Any violation of the measures announced by the RBZ will attract a penalty in terms of the relevant provisions of the Banking Act.
Online Reporter