HARARE - The Deposit Protection Corporation (DPC) says it is currently paying off 97 percent of depositors whose funds were locked up in liquidated Royal Bank (Royal).

Wisdom Mandizvidza, DPC’s bank resolution manager, said over 5 000 accounts with balances that do not exceed the maximum insurable limit of $500 will be paid in full.

Royal held a total 6 000 accounts.

“Although the cover sum is small, most of them (Royal depositors) are at the low end in terms of the amounts in their accounts,” said Mandizvidza at the commemorations of World Consumer Rights Day yesterday.

He said depositors whose accounts held more than the maximum insurable limit, including corporates, “will have to be patient and wait for the liquidation process which is currently underway to be concluded.”

This comes as the Royal Bank was placed under provisional liquidation on February 20 after it voluntarily surrendered its licence.

Royal Bank had failed to secure new investors.

DPC’s chief executive John Chikura was appointed provisional liquidator.

In July last year, Royal Bank directors resolved to surrender its banking licence following the deterioration of its financial position.

The new investor was expected to inject funds towards the institution’s compliance with the Reserve Bank of Zimbabwe (RBZ)’s minimum capital within the stipulated regulatory timeframes.

Investigations by the RBZ had indicated that the institution was not in a safe and sound financial condition.

As at June 30, 2012, Royal was critically undercapitalised with a core capital of $1,9 million — way below the minimum regulatory capital requirement of $12,5 million for commercial banks at the time.

Royal was also saddled with chronic liquidity challenges and relative to the balance sheet size, the bank had a huge gap of $3,03 million in the critical 0-7 day time band as at June 14, 2012.

Last year, the RBZ ordered banks to recapitalise to a minimum $100 million in a phased manner.

In the first phase — whose deadline expired on December 31, 2012 — commercial and merchant banks were supposed to increase their minimum capital to $25 million, then up it to $50 million by June 30 this year and $75 million by December 31.

The institutions should reach $100 million by June 30, 2014.

DPC was established to, among other roles, compensate depositors for losses incurred in the event of insolvency of a contributory institution.

The establishment of an explicit deposit insurance scheme in Zimbabwe in 2003 was a major milestone in the banking sector as it ushered in a new era whereby there are explicit rules and regulations regarding the compensation of depositors in the event of a bank failure.

The explicit scheme clarifies the government’s obligation to depositors and enhances public confidence and financial stability by establishing a framework for the resolution of failing and failed banks.

DPC says it continuously review its mandate in order to effectively provide deposit protection to the vulnerable members of society and deliver comprehensive public awareness programmes aimed at increasing financial literacy and better informed depositors. - Kudzai Chawafambira