Capping banks' shareholding noble

HARARE - The Reserve Bank of Zimbabwe (RBZ)’s initiative to limit individual shareholding in banks and other financial institutions is a noble idea that will inspire confidence in the sector and ensure protection of
depositors’ funds.

The move, coming at a time when most indigenous banks are facing collapse due to non-performing insider loans as well as abuse of depositors funds by bank owners and managers, is a relief to the banking community.

If statistics from the central bank that non-performing insider loans stood at $117,4 million out of $175,3 million as at December last year are anything to go by, then the move was long overdue.

We believe that government should also expediently implement the amendments to the Banking Act to make it possible to prosecute shareholders, directors or senior managers who act negligently or fraudulently resulting in loss of money by depositors or failure of banking institutions.

This will not only inspire confidence in the economy but will also go a long way in promoting good corporate governance and strengthen control of banks.

Over the past few years, most people in the country have lost confidence in the banking sector following reports of banks’ majority shareholders abusing deposits resulting in the collapse of the financial institutions.

To worsen the situation, the bankers were never charged or convicted despite overwhelming evidence revealing that they converted depositors funds to their own personal use.

For instance, Renaissance Merchant Bank, now Capital Bank, was driven into negative equity after top shareholders of its holding company allegedly borrowed millions of dollars of depositors’ funds in breach of banking regulations.

Patterson Timba had 44,7 percent shareholding in Renaissance Financial Holdings Limited through Bethel Trust and other vehicles while his then fellow top executive, Dunmore Kundishora, held an effective 24,2 percent stake.

The two thus held almost 69 percent between them, allowing them to dominate the ownership.

Other banking institutions that fell under similar circumstances include Interfin Banking Corporation — whose top shareholders include Farai Rwodzi, Timothy Chiganze and Jerry Tsodzai — Royal Bank and First National Building Society.

For this economy to grow, there is need to strengthen the financial services sector through tight regulations, monitoring and reasonably capitalised banks.

We should have laws that not only prohibit single share-ownership in banks but also forbid those with a chequered past from participating in the sector.

This is because banks thrive on trust and once that trust is lost, it will be impossible to regain it.

It is our hope that the acting RBZ governor, Charity Dhliwayo, will spruce up the banking sector by removing bad apples and help restore people’s confidence in financial institutions.

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