HARARE - Capital Bank Corporation Ltd (Capital Bank) is planning a $20 million rights issue, as part of efforts to comply with the Reserve Bank of Zimbabwe (RBZ)’s minimum capital requirements.

With the Harare-based institution backed by a deep-pocketed shareholder in the form of National Social Security Authority (Nssa), Capital Bank’s shareholders are expected to approve the bank’s capital raising plan at an extraordinary general meeting on December 31.

“Capital Bank will be compliant with the central bank’s capital requirements after the rights issue,” said a source close to the development, adding that the process was already underway.

The source said following the compliance, Capital Bank is considering re-looking at its business model, as indicated during its rebranding exercise.

“Capital Bank intends to change from its current merchant bank model to a microfinance bank,” the source said.

“The new model will allow Capital Bank to contribute significantly towards economic growth through a wider and far-reaching product offering to the middle markets,” the source said.

The source, however, said the institution awaited regulatory approval.

In July, the Central Bank increased financial institutions’ minimum capital requirements by 700 percent, with commercial banks’ new thresholds moving to $100 million, from $12,5 million.

Merchant banks, whose minimum capital was pegged at $10 million, were directed to raise $90 million more to reach $100 million per institution, while building societies’ new capital thresholds went up to $80 million, from $10 million.

Gideon Gono, the RBZ governor, has said banking institutions must comply with 25 percent of their prescribed minimum capital by December 31, 2012 and 50 percent by June 30, 2013.

He said the players must achieve 75 percent compliance by December 31, 2013 and 100 percent by June 30, 2014.

However, Gono recently hinted that he might extend an “olive branch” to financial institutions that fail to meet the December 31, 2012 recapitalisation deadline.

“…In case any bank fails to meet the deadline we have got ways and means to deal with those who have credible recapitalisation programmes that show that they are making efforts to comply,” Gono said.

In July, Capital — formerly ReNaissance Merchant Bank (RMB) — said it was on a firm footing that it had even managed to repay most of its depositors.

“While it has been difficult, we have retained some depositors. We have honoured our obligations and paid off all vulnerable groups, including schools and universities,” Lawrence Tamayi, Capital Bank’s managing director, told businessdaily then.

The institution has completed a rebranding and restructuring exercise following the emergence of Nssa as a major shareholder.

Nssa — a pension fund —currently holds an 84 percent stake in the bank. - Eric Chiriga, Business Editor