HomeNewsNo to bank mergers — research firm

No to bank mergers — research firm

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Local research firm, Econometer Global Capital (EGC) said the state of banking sector in the country remained fragile and was against the idea of mergers for “sick” and ailing banks.

In a research note, the firm said there was need for a Financial Service Authority (FSA) which would oversee the banking sector operations while the central bank was left to craft the macroeconomic policies.

“This might also be an efficient channel to restore confidence in Zimbabwe’s financial service sector since the Reserve Bank of Zimbabwe (RBZ) is incapacitated to restore both hope and sanity,” read part of the report.

“The state of banking in Zimbabwe is certainly fragile and we are vehemently opposed to the idea of mergers for sick and ailing banks. One cannot treat HIV by marrying an HIV positive person or an equally infected one. ‘HIV positive banks’ require medication not a partner to correct the anomaly.”

The research firm engaged officials from Imara, TN Bank, ZB, Metropolitan, CBZ, NMB Bank, Barclays Bank, Ecobank, Agribank and MBCA Bank.

EGC said the FSA Act would assist in improving the waning confidence of the nation’s banking sector following years of “controversial” policies by the RBZ which saw defacto dollarisation of the economy.

 “The 90% of banking sector CEO’s are adamant that there is no need to close the failing banks; they believe a lifeline should be extended to allow them to recuperate,” read part of the report.

“The flouting of corporate governance laws, average skills of banking sector employees and an inefficient central banking system continue posing a threat to the capitalisation of the whole sector in general.”

The research firm said the banking sector was poised to recover more sharply if a human resource audit was conducted which set limits on skills expected from top bankers.

It noted that financial inclusion was still limited to middle and high-income urbanites with both low income and rural populace still unbanked.

“The immediate outlook will remain shaky for the financial service sector due to the imminent general election and constitutional referendum whose funding remains hazy,” said EGC.

“This is expected to crowd out other potential borrowers in the market leaving an average of 72% of funds within 76% of the current loan deposit ratio in the hands of risky activities.

“Dominance by Revaluation Capital component ahead of paid up capital in most banks balance sheet remains a worrying aspect with the central bank in Zimbabwe incapacitated to correct the anomaly.”

In a statement on Friday the Reserve Bank of Zimbabwe governor Gideon Gono said it was the legal duty of the central bank to superintend over the smooth functioning of the country’s financial sector.

“To this end, tendencies towards firing harmful verbal economic gunpowder must be minimised by all stakeholders in the interest of the economy and the Reserve Bank of Zimbabwe Board forewarns people playing with economic gunpowder to leave the game to those well-trained in its use and safe custody, lest the unintended will happen, to everyone’s future regret,” said Gono.

“Currently as the RBZ we are battling to stabilise indigenous -owned financial institutions that are not adequately capitalised and which are experiencing liquidity challenges due to a variety of factors.”

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