Gono may extend banks' recapitalisation deadline

HARARE - Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono says he might extend an “olive branch” to struggling financial institutions that fail to meet the December 31, 2012 recapitalisation deadline.

Although most banks such as CBZ Bank, FBC Bank and Kingdom Bank among others had by September 30, either submitted plans for recapitalisation or surpassed the 25 percent December target, there are fears that some are still struggling to raise the capital within the deadline.

Gono said while it was premature to forecast what will happen before the end of the year, the central bank was willing to extend the deadline for the cash-strapped banks.

“We are only at the beginning of December and a lot can happen in 24 hours, so we are going to only find out in January how many banks have complied and how many have failed,” Gono told businessdaily in an interview.

“But, 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,” he said.

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.

Gono said the 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.

In other African markets, banking sector volatilities have forced regulators to impose short deadlines of up to six months, but the RBZ instituted a phased plan, in light of the liquidity challenges in the economy.

Gono reaffirmed the importance of a strong financial system, saying insolvent and undercapitalised banking institutions had a higher propensity for delinquency.

This year alone, Genesis Bank, Royal Bank and Interfin Bank closed shop amid revelations of serious abuse of depositors’ funds and non-performing insider loans among a cocktail of operational irregularities.

“It is important that we grow and bring stability into the financial services sector. If banks have no adequate funding then they are not in a position to meet the needs of the private sector and that is not good for the economy,” he said.

Gono said it is critical for financial institutions to have healthy balance sheets if they are to get support from international lending institutions such as the African Export and Import Bank. - John Kachembere

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