Banks' deadline extension welcome

HARARE - Reserve Bank of Zimbabwe (RBZ)’s move to extend the $100 million minimum capital requirements deadline for banks to 2020 is a good development in light of the prevailing liquidity challenges obtaining in the country.

The introduction of the $100 million capital requirement in 2012 was a noble idea by the central bank not only to minimise systemic risks in the fragile financial services sector, but also help revive the country’s ailing economy.

This is because by building and maintaining adequate capital, banks are able to play a supportive role through mobilising surplus investible funds on the money and capital markets for deployment to productive sectors.

However, we felt the initial two-year period to meet the deadline was not fair considering the acute liquidity crisis in the country.

Zimbabwe is currently saddled with a host of challenges such as high political risk, foreign investment flight, indigenisation Act fears and lack of cheap credit lines among others — and these are enough to deter the raising of offshore funds for our local banks.

As such, the announcement this week by Charity Dhliwayo, the acting RBZ governor, that banks’ deadline had been extended from June 2014 to December 2020, is good news to the majority of local banks that have been struggling to raise the money.

We understand that some financial institutions’ insolvency problems are of their own making through gross mismanagement and high non-performing loans, the six-year extension by the central bank will ensure that local banks have enough time to seek foreign investment.

Given this lifeline, local banks must now not sit on their laurels and wait for 2020, but they should continue their efforts to strengthen their capital positions in order to maintain relevance in the economy.

There is no way the country’s economy can grow without a strong financial services sector and the government seems to be doing the right thing in building confidence in the banking industry again.

The central bank’s move to benchmark interest rates is also a welcome development to the majority of Zimbabweans who for the past few years have been at the mercy of rogue bankers.

Following the expiry of the Memorandum of Understanding between RBZ and the Bankers Association of Zimbabwe last year, we were worried that bankers would once again inflate interest rates.

To its credit, the apex bank realised that it would be difficult to control interest rates, without inflicting pain on banks as well as customers, and decided to come up with a benchmark formula to keep the rates at reasonable levels.

Comments (2)

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Irrrigation Matters - 3 February 2014

Irrigation water reticulation engineers,Consultancy, designs ,boreholes, RAINGUN SPRINKLERS !!overhead irrigation, drip irrigation, pump experts- installation, repairs, trolleys (portable), pivots, pipeline survey and installation, garden irrigation, booster pumps,maintenance,surface irrigation, tanks and tank stands.Thinking Long term & Reducing Costs . rainflotech@yahoo.com 0715415931; 0773 528 045

Irrrigation Matters - 3 February 2014

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