Bankers’ Association of Zimbabwe and FBC Bank CEO John Mushayavanhu said the Ministry of Finance should recapitalise the Deposit Protection Board (DPB) to guarantee depositors will be paid in full the insured amount in the event of bank failure.
Speaking at the 2011 Zimbabwe Independent Banks and Banking Survey launch on Friday, whose theme was “Banking on Stability”, Mushayavanhu said stability in banks should be maintained and this could be strengthened by ensuring depositors have confidence in banks.
“The ministry should recapitalise the Deposit Protection Board, to increase confidence levels.
“That is one way we can attract the unbanked population,” said Mushayavanhu.
The Banks and Banking Survey is conducted by NewsDay’s sister publication The Zimbabwe Independent in partnership with FBC Bank.
“There is a lot the government can do to bring confidence to the banking sector which is stabilising. It does not cost much to recapitalise, but we are worried by the pace it is taking to respond to such a call,” Mushayavanhu said.
He said banking stability means the financial system has capability to allocate funds efficiently and absorb shocks as they arise, thus preventing disruption of real sector activities and financial system.
“It is a condition represented by a strong financial system capable of withstanding economic shocks, one that is able to ensure intermediary function, settlement of payments and diversification of risk,” he said.
Speaking at the same occasion, Alpha Media Holdings CEO Raphael Khumalo said stability in the financial sector was important as it enables those in power to understand and make decisions that promote economic growth.
“I was looking at different definitions of stability and I came across words such a sound, solid, operate properly, being predictable and being able to support economic growth,” he said.
DPB is an autonomous statutory body established under the Banking Act Chapter 24:20, to administer the Deposit Protection Fund (the Fund).
It’s primary objective is to provide deposit insurance to depositors in registered deposit-taking institutions including commercial banks, merchant banks, finance houses, discount houses, and building societies.
DPB promotes depositors’ confidence in the banking system and contributes to growth in stability and soundness in the financial sector.
The board works closely with the bank supervision department of the Reserve Bank. In this regard, it supports bank exit procedures by giving the supervisor greater flexibility and freedom to let problem banks fail in a managed fashion.
Keynote speaker, renowned economist Rongai Chizema, said Zimbabweans should look at the financial sector in a global context since the country was using the US dollar.
“Whatever risk is attached to the US dollar comes back to Zimbabwe. Bankers should closely monitor such global events,” Chizema said.
He said liquidity challenges in Zimbabwe were likely to continue, but coming with measures and policies that stabilise the financial sector was a priority “at this stage”.
“Stability concerns at present are the indigenisation policy, lending dilemma, absence of the lender of last resort, capitalised versus undercapitalised banks and indigenised versus foreign banks,” Chizema said.