Zim bank closures normal: RBZ governor

HARARE - Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says the numerous bank closures seen in recent years are normal in tough economic environments and insisted that the country’s banking sector remains “safe and sound”.

“This happens everywhere. In the United States, banks closed in 2008 (after a) financial crisis,” he said last week on the sidelines of the Confederation of Zimbabwe Industries 2015 economic outlook symposium, adding its “only that in Zimbabwe we tend to focus on the negative and this undermines investor confidence in the economy”.

However, analysts have warned that Zimbabwe’s banking industry remains fragile following the collapse of several institutions due to mismanagement, bad corporate governance, spiralling non-performing loans and an acute liquidity crisis.

Early this year, Transport minister Obert Mpofu’s Allied Bank voluntarily surrendered its banking licence, with about 245 employees set to lose their jobs upon liquidation.

Other collapsed financial institutions include Interfin, Royal Bank and Genesis.

In the past few months, some banks have been unable to meet withdrawals, prompting calls for mergers and amalgamations to help the troubled institutions shore up their capital positions.

Last year, in his maiden Monetary Policy Statement, Mangudya said he was concerned about four banks — Metropolitan, Allied, AfrAsia and Tetrad — facing liquidity and solvency challenges due to macro and institution specific factors.

These banks commanded low market shares in terms of loans (8,8 percent), assets (7,2 percent) and deposits (6,7 percent) as at June 30, 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,” he said at the time.

“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,” said Mangudya.

He conceded that the general slowdown in the performance of the domestic economy continued to pose challenges to the banking sector.

“However, the banking sector has demonstrated resilience under the current macroeconomic environment and the sector has remained safe and sound,” he said.

“If you ask me, I am seeing an awakening giant. We have all the necessary resources at our disposal to take this economy forward,” he said.

Masimba Kuchera, an economic analyst concurred with Mangudya.

The country’s banking system was “fairly stable”, he said.

“There is a bit of vulnerability although the banking system is strong. There seems to be many banks for too few depositors at the moment,”said Kuchera.

Zimbabwe currently has 18 operational banks including foreign-owned Barclays, Standard Chartered, MBCA and Stanbic.

Comments (6)

Its a shame that the governor concludes that the banking sector is sound when each other time depositors loose their hard earned cash to bank shareholders and management without any reprieve. Is that you also benefit from these bank failures through unpaid loans you get before banks collapse? The public is being riped off.

gwaya - 27 January 2015

governor nyarai, you should be ashamed saying these words. the sector is not safe and everybody knows, including you.arrest these rogue bankers walking free in the streets after stealing from innocent depositors.

me - 27 January 2015

It's a shame to have a reserve bank chief say "it's normal for a bank to collapse". It's not normal Mr Mangudya because people never set up banks to fail/collapse. It only means ceratin macro-economic fundamentals are not okay and that is not normal. Why are people afraid of saying the truth? Is it because you are afraid of losing your jobs or ruffling the feathers of the establishment? Once again I say it's not normal when 245 employees lose their jobs because a bank is collapsing. Wake up John!!!

Kunda Kinde - 27 January 2015

Look John, you are a respected banker and economist. You successfully led CBZ until you left for the RBZ. Surely, would it have been normal to you if CBZ shut down. These banks are not collapsing mainly because of the harsh economy but due to gross mismanagement, misgovernance and reckless lending. Why is it that the foreign owned banks like Barclays and others are solid. At this rate, you will never rebuild people's confidence in the banks, which was one of your major tasks when you took office. Right now Afrasia is facing mounting challenges and you are quite about it. Forget about the Royals and Trusts, they are gone...focus on the ones that can be saved from collapse... We expect your action as the regulator on MetBank, Tetrad...Allied has bit the dust.

Former banker - 28 January 2015

veduwee, manga muchida kuti governor vati kudini? he is the overall head and cannot afford to be explicit in his comments. All I gather is he blamed it all on the poor economy.

jore - 28 January 2015

Bank growth and bank collapse are both normal processes going in the opposite direction.one is favourable but the other one is not.

taderera - 30 January 2015

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