Barclays Bank of Zimbabwe says delays in normalising the country’s financial markets after a period of “dislocation” grossly undermined financial intermediation even as credit demand soars with every one of industry’s efforts to recover from a decade-long economic crisis.
George Guvamatanga, Barclays managing director, says full normalisation of Zimbabwe’s banking sector could only come about with the restoration of the Reserve Bank of Zimbabwe (RBZ)’s lender of last resort, re-establishment of a credit bureau and implementation the Basel II framework for risk management.
The scrapping of capital adequacy ratios in July has heightened the pressure for banking institutions to implement the Basel II Accord as an alternative framework of risk management.
“The journey to the full normalisation of the market remains in progress, and whilst some steps have already been taken, there remains some way to go,” Guvamatanga said.
“It is my view that the financial services sector will need to take further steps to strengthen risk management practices through the re-establishment of credit bureaus, implementation of robust risk management frameworks like Basel II and active management of banks’ risk appetite in line with the expected consequences of major decisions made.”
The RBZ discontinued its lender of last resort function in February last year when the economy adopted multiple currencies.
The abrupt currency switch also robbed financial markets of a credit bureau. A credit bureau may be a company or system that collects, collates and disseminates information on the credit profile and borrowing history of individual consumers from multifarious sources, including utilities, assigning a credit score to each loan applicant.
Its absence means a borrower can use one balance sheet to borrow from more than one bank, increasing the risk of defaults and financial sector asset impairments that could lead to bank failure.
Although technical work on these issues started last year, progress has been quite sluggish, paralysing the conventional lending activities of banks, many of which have been forced into prudential credit risk management and conservative lending.
“Barclays sought to implement a strategy that protects all our key stakeholders by growing our assets in a controlled manner, whilst taking the opportunity to implement cost and process optimisation measures that allowed us to navigate the current landscape in a way that positions the business for future growth.”
As a result of the conservative lending strategy, Barclays relied on fee and commission income in the first half and kept the impairment rate at 0,03% of the loan book.
The country’s third largest lender by assets now wants the monetary authorities to tackle the issues as it strives to grow its loan book in the second half of the year to head a loss in the first six months.
The bank reported an after-tax loss of $0,6 million or a 0,003 cents basic loss per share.
Its liquidity ratio for the period averaged 79% against a regulatory threshold of 10% to boost its capacity to settle short-terms debts obligations.