RBZ extends banks’ minimum capital deadline

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By Zimbabwe Investor on March 21, 2013. No Comments

Banks along Samora Machel, Harare.

Banks along Samora Machel, Harare.

BANKS in Zimbabwe will now be expected to meet minimum capital requirements by 2020, instead of next year’s December 31 deadline previously set by the Reserve Bank of Zimbabwe, central bank chief Gideon Gono has said.

Reserve Bank of Zimbabwe governor Gideon Gono. Picture: SUNDAY TIMES

Mr Gono cited the ongoing uncertainty fuelled by the 51% indigenisation programme as the main reason for the decision.

Liquidity challenges and low economic growth have also been identified as contributing factors to the reserve bank’s decision.

“We are also mindful of the fact that some of the investors are from outside and they may be concerned about issues to do with indigenisation and they have reservations of putting in money that upsets what is on paper in terms of indigenisation. That may be the reason why certain transactions take long, but we will remain flexible,” said Mr Gono.

Both foreign-owned and local banks have been trying to court investment to meet the capital requirements.

The National Merchant Bank last month secured $16m in lines of credit, while South Africa’s Nedbank has facilitated a $75m injection into its Zimbabwean unit, MBCA.

“The new capitalisation requirements and compliance with indigenisation will likely result in major changes in the structure of the banking sector as players try to comply with those two requirements,” said MBCA chairman Willard Zireva.

Foreign-owned banks in Zimbabwe have been involved in a pickle with Minister of Youth Development, Indigenisation and Empowerment Saviour Kasukuwere, who is eyeing to take over a majority stake in the banking sector.

Mr Gono has resisted Mr Kasukuwere’s attempts, saying the move will “destabilise” the financial services sector.

In July last year, the reserve bank raised minimum capital requirements for commercial and merchant banks to $100m from $12.5m and $10m, respectively.

The reserve bank defended its move and said it was minimising systemic risks in the fragile financial services sector, after the collapse of Genesis and Interfin banks.

In August, banks then received a partial reprieve and were instructed to have raised $25m by the end of last year, with the rest of the capital requirements to be raised by December next year.

The reserve bank indicated that 67% of the banking sector had complied with the $25m deadline set for last year.

“We have now come up with what we have called ‘Vision 2020’, where we expect banks to have complied by 2020. We are urging industry to also come up with their 2020 visions…. I would like to see a banking sector that is fully capitalised to the tune of $100m,” Mr Gono said.

Meanwhile, Mr Gono has poked holes at the Zimplats indigenisation deal sealed in January by Mr Kasukuwere by means of vendor-financing.

Mr Gono said the deal, which is worth more than $900m, had “a lot of issues that need to be looked into”.

These include; corporate governance, legal issues, perceived lack of transparency in the appointment of advisers to the national indigenisation and economic empowerment board, inappropriate evaluation methods, and the potentially excessive financial burdens imposed on taxpayers and indigenous beneficiaries of the empowerment deals.

“We also need to pay attention to the conditions attached to some of these transactions and violations of standing exchange control laws rules and regulations, all of which could have been avoided had necessary consultations been done,” Mr Gono said.

President Robert Mugabe earlier this month also called for the transaction to be reviewed.