Five banks, excluding POSB, had by the end of March not met the minimum capital requirements of the Reserve Bank of Zimbabwe (RBZ), raising fears of instability in the financial sector.
In a report presented at the Independent Dialogue Forum in Harare Wednesday, RBZ governor Gideon Gono said capital was one of the lines of defence against losses in the banking sector.
He said it also served as a source of financing for bank operations as well as acting as a buffer for absorbing unexpected losses when they occur.
“As at March 31 2011, 20 out of the 25 operational banking institutions, excluding POSB which is regulated under a separate statute, had complied with our prescribed minimum paid-up capital requirements,” said Gono in his report.
The RBZ had set a June 30 deadline for financial institutions to meet capital requirements of $12,5 million for commercial banks and $10m for merchant banks.
Information provided by the central bank showed that Kingdom Bank, Royal Bank, ZABG, Genesis Investment Bank and ReNaissance Merchant Bank remained under-capitalised.
ZABG had a negative bank balance of $9,2 million while Genesis Investment bank had a negative balance of $331 000.
ReNaissance, with a negative balance of $16 million has since been placed under curatorship.
Several other commercial banks remain fragile although they had, by March, managed to meet the minimum capital requirements of $12,5m for commercial banks.
TN Bank had a capitalisation of $12,546m, Agribank $12,8m, recently re-licensed Trust Bank $13,358m and FBC Bank $15,2m.
Top of the list of the most capitalised banks was CBZ Bank at $50m, Standard Chartered at $35,5m, Barclays Bank at $31,4m, Stanbic Bank at $29,1m, BancABC at $28,3m, ZB Bank at $20,9m, Interfin at $19,5m, NMB at $18,8m and MBCA at $16,2m.
Gono said as of June 28 2011, 15 out of the 16 asset management companies had complied with the minimum paid up equity capital requirement of $500 000.
He said various extensions on capitalisation deadlines and numerous calls for market-oriented solutions, including mergers and acquisitions for the few banking institutions, which are not yet in compliance with capital requirements should not be mistaken for regulatory forebearance.
“The Reserve Bank of Zimbabwe expects these banks to finalise their capitalisation initiatives and contribute meaningfully to economic growth and development, otherwise there won’t be further social justification for existence of these banks if they are not servicing their communities effectively,” said Gono.
“Going forward, the Reserve Bank is going to meet all undercapitalised banking institutions together with their boards and shareholders, to determine the way forward.”
The RBZ governor said financial institutions continue to face challenges of tight liquidity attributable to volatile short-term transitory deposits and limited lines of credit; low savings owing to low salaries and wages and low interest income against high operational costs.
He said some financial institutions were operating with archaic core banking systems adding that the central bank will soon evaluate the suitability of their core banking systems in relation to the nature and complexity of their operations.