In his monetary policy statement yesterday, RBZ Governor Dr Gideon Gono said ZABG Bank, Royal Bank, Kingdom Bank, Genesis Investment Bank, Ecobank, and Renaissance Merchant Bank, which is now under curatorship, had presented fictitious equity partners to the central bank to buy time.
«Banking institutions should not mistake the Reserve Bank’s extension of the recapitalisation deadlines to facilitate materialisation of recapitalisation initiatives as indulgent regulatory forbearance,» warned Dr Gono.
«Despite various regulatory extensions on capitalisation deadlines and numerous calls for mergers and acquisitions, a few banking institutions are not yet in compliance with capital requirements,» said Dr Gono.
The deadline for compliance, which lapsed on December 31 2010, had been extended to June 30 this year to afford troubled banks time to raise the required capital.
Kingdom, Royal and ZABG have been given a special dispensation after presenting plans to raise the required capital levels.
Kingdom, whose capital position stood at US$2,79 million as at June 30, against the required US$12,5 million, says it intends to raise US$15 million through a rights offer and private placement by October 31.
It has been given until February next year to comply.
Royal Bank, which is falling short by US$11,5 million, said it is negotiating with three potential investors to raise the outstanding funds by September 30 2011.It has been granted a reprieve until September 30, 2012.ZABG, with a negative capital of US$14,39 million, said investors who intend to take up 60 percent stake have since conducted due diligence, and has thus been given until September next year to put its house in order.
Genesis, with a negative capital of US$525, 537.11, had failed to court foreign investors and was now in negotiations with a number of local potential investors.
Ecobank, with a shortfall of about US$1,3 million to meet the $10 million for merchant banks, is believed to be regularising its position.
The bank is also reorganising its structure to transform into a commercial bank.
Revelations by the central bank follow the recent placement under curatorship of Renaissance Merchant Bank after investigations revealed that it was technically insolvent as it operated in an «unsound and unsafe manner».
The development that has sent shockwaves in the market.
Yesterday, Dr Gono said the central bank had noted with concern the resurgence of structural and operational deficiencies reminiscent of the 2004-2006 banking sector crisis at some banks.
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Compared to the rest of the world, bank failures in Zimbabwe have always been unique as they are attributable to internal abuse, as opposed to non-performing third party loans,» noted Dr Gono.
The central bank has described the banking sector as largely sound.
However, it emerged yesterday that following the developments at Rannaisance, indigenous banks had witnessed a flight of deposits amounting to US$1,2 billion to banks perceived to be safe, particularly foreign-owned ones.
This has created liquidity challenges at some banks, many of which have been in the forefront of lending to productive sectors of the economy.
«The continued flight of deposits would, therefore, adversely affect the lending activities of the local banks.»
To further tighten its supervisory role and in accordance with the Common Market for East and Southern Africa framework for financial stability, the RBZ, along with other central banks, has adopted a comprehensive framework for a*sessing financial stability.
In this regard, the RBZ has initiated the establishment of a Multi-disciplinary Financial Stability Committee comprising local supervisory agencies and other stakeholders.
This committee will facilitate early identification of potential sources of risk to stability and promote adoption of preventive and timely remedial policies.
The Insurance and Pension Commission, the Deposit Protection Board, the Securities Exchange Commission and the Reserve Bank have signed a Memorandum of Understanding to enhance co-operation and co-ordination of supervisory activities.
Furthermore, the central bank, in liaison with the International Monetary Fund, has enhanced the Troubled and Insolvent Bank Policy to facilitate timely identification, rehabilitation and resolution of troubled banks.
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«According to the policy, the Reserve Bank will ensure that non-compliant institutions exit the market with minimal disruption to the banking sector and inconvenience to the public,» said Dr Gono.
The RBZ chief lamented the central bank’s current compromised position as lender of the last resort due to financial challenges.
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He said although the facility was opened to banks in February, there had been no drawdown due to the complicated collateral required.
The only acceptable collateral under the facility were Deeds of Transfer on immovable property, which had other inherent costs particularly relating to perfection which involved bond evaluation and registration.
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Prior to the introduction of multiple currencies in 2009, the central bank played the lender of last resort function through the intra-day facility and overnight accommodation to banks experiencing short-term liquidity challenges.
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The bank would provide the required funds due to its ability to create money then.
Its current balance sheet status has significantly constrained this role.
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