Where is the Deposit Protection Board?

HARARE - For the past few months, depositors, mainly with Metbank and AfriAsia, have had to endure long queues to access their hard-earned funds while the RBZ keeps watching from a distance.

In the past few days, things have gotten worse at AfrAsia, as it battles to meet a low self-imposed withdrawal limit of between $50 to $200.

With all this said and done, one wonders why the RBZ has not intervened; after all it’s very much aware of the bank’s precarious financial position.

We all know that Zimbabwe’s financial services sector is currently faced with a fair share of challenges stemming from the current liquidity challenges facing the country.

The situation has unfortunately not spared four banks namely Metbank, Allied Bank, AfrAsia and Tetrad, a position confirmed by the RBZ in its recent monetary policy.

In the document, RBZ governor John Mangudya stated that the four institutions were grappling with liquidity and solvency challenges due to macro and institution specific factors.

The dossier further noted that the banks command low market shares in terms of loans (8.8 percent), assets (7.2 percent) and deposits (6.7 percent) as at 30 June 2014.

“Cognisant of the need to protect the interest of depositors and promote banking sector confidence, the Reserve Bank has been engaging these institutions to come up with credible plans to turnaround their waning financial condition.

“In this regard, shareholders and boards of the distressed banks have been directed to finalise implementation of their turn around plans, failure of which the Reserve Bank will be left with no option but to intervene and institute appropriate supervisory action in terms of the Banking Act.”

However, the question that comes to mind is, if the RBZ  has been engaging them and nothing has come through in terms of capitalisation and improving their liquidity positions to meet depositors demand, what action is it taking?

What does it have to take for the RBZ to give depositors some assurances over their funds in the struggling banks? Europe went through a worse off crisis but it’s banks chief regularly communicated to the banking public actions on remedies being taken to bring stability to the sector.

As confidence in local banks continue to erode further, more billions will be added to the estimated $4 billion currently circulation outside the formal banking system.

We have over the years seen our fair share of bank closures and curatorship’s, and it would not be surprising to many if that’s the action the monetary authorities are battling with.

If one has to trace back in history, it will be found that a total of six banks, namely Interfin Banking Corporation, Genesis Investment Bank, Royal Bank, Trust Bank and recently Capital Bank  — have closed shop since dollarisation in 2009, mainly attributed to poor corporate governance and risk management systems and inadequate capitalisation.

Turning to the Deposit Protection Board (DPB), where is it in all this? Should it not also add its voice by advising depositors to shy away from certain banks so that it does not have to issue concerning statement like on Wednesday when it said it did not have sufficient funds to pay Trust Bank depositors.

Government might have gazetted Statutory Instrument 156 of 2013 in November, which states that depositors will be paid their funds immediately after a financial institution is placed under curatorship but if the DPB is struggling to deal with funds owed to depositors of one, what about four banks.

 

Comments (2)

We deserve better from the government and the RBZ. This is our money at risk please

feedup - 21 September 2014

nhaimi, hakunawo here mabasa ikoko?

jobless - 24 September 2014

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