Govt moves to save struggling banks

HARARE - Finance minister Patrick Chinamasa says government is crafting measures to save indigenous banks from collapse.

This comes as numerous local banks have closed down due to mismanagement, poor corporate governance, reckless lending and tight liquidity among other challenges.

Low depositor confidence has also negatively affected the banks.

Chinamasa, who told Parliament on Monday that most of the local financial institutions were also collapsing due to abuse of depositors’ funds, said government would work on how to nurture properly-managed banks.

“…it is important, going forward, to have indigenous banks which are well managed and do not raid depositors’ funds,” he said.

“It’s a painful experience to hear that a bank licence is being cancelled. In most cases, we have had to bend backwards to allow the troubled banks more time to recapitalise,” said the Treasury chief.

Several local banks, including Royal, Genesis, Interfin, Capital, Trust and recently Transport minister Obert Mpofu’s Allied have had their licences cancelled by the Reserve Bank of Zimbabwe (RBZ) after failing to meet the regulator’s minimum capital requirements.

Industry experts say the bank closures give credence to the view that most indigenous banks are vulnerable to the mounting economic pressures and are also less prudent and stringent in their risk assessments on lending compared to foreign-owned banks.

Zimbabwe’s banking sector is saddled by around $700 million bad loans, the bulk of which are on local bank’s books.

Notwithstanding repeated statements by Chinamasa and the central bank that the Zimbabwean banking industry is safe, there have been signs of strife among the locally-owned banks.

Some of them have been unable to meet daily demand for cash from depositors, prompting calls for mergers and amalgamations to help the local finance institutions shore up their capital bases and capacity.

Out of 17 operational banks in Zimbabwe, only foreign-owned banks — British-owned Barclays and Standard Chartered Bank, Stanbic, Nedbank’s MBCA, Togo-based Ecobank, and CABS, a subsidiary of Old Mutual — are strong, with a combined deposit base of more than $2 billion.

In his maiden Monetary Policy Statement last year, RBZ governor John Mangudya 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.

The central bank governor said then he was concerned over four banks namely Metbank, Allied Bank, 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.

Comments (2)

Hello there are other banks like CBZ, BancABC that are performing very well. BancABC was an indigenous bank until recently. Not only foreign banks are strong as you state above. Get your facts straight

Banker - 6 February 2015

I hate to hear of lies from a respected paper. Is FBC not sound, ZB also. I dont know of your opinion about CBZ. Munozobva manyanyoratidza kuti who is funding you. @ Banker, BancABC is headquartered in Botswana. Tipeiwo ma serious vamupepeti.

jore - 6 February 2015

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