HomeNewsD-day for non-compliant banks

D-day for non-compliant banks

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Banks that have not yet complied with the Reserve Bank of Zimbabwe (RBZ)s minimum capital requirements have until end of day today to finalise their recapitalisation plans, amid Cabinet considerations to review mandatory capital adequacy thresholds for financial institutions.

In his monetary policy statement a fortnight ago, RBZ governor Gideon Gono said there was no prudential basis for the continued existence of such entities.

As at December 31 2011, 20 out of 25 operating banking institutions (excluding POSB) were in compliance with the prescribed minimum capital requirements.

Commercial banks are required to deposit $12,5 million with the central bank while merchant banks should have $10 million.

Accordingly, all non-compliant institutions, including those previously issued with special dispensations for compliance with minimum capital requirements, have up to February 14 2012 to finalise their recapitalisation initiatives or consummate their mergers and acquisitions, said Gono in his monetary policy statement last month.

The central bank governor said by no later than February 29 this year, it would engage institutions that would have failed to identify credible partners and conclude the recapitalisation transactions.

Gono said the RBZ would deal decisively with all non-compliant institutions in terms of the Troubled and Insolvent Bank Policy by no later than March 31 2012.

The RBZ has noted that despite several extensions of recapitalisation deadlines, a few banking institutions have failed to conclude their recapitalisation initiatives. As such there is no prudential basis for the continued existence of such entities.

Industry and Commerce minister Welshman Ncube last week told delegates attending the Independent Dialogue Series in Harare that Cabinet was seized with the banking sector crisis.

Government is aware of the challenge. There was extensive debate, we spent over two hours debating including the cosmetic measures, said Ncube.

We were clear the measures taken were counterproductive and the Finance ministry must be re-engaged.

He questioned the reasoning for setting blanket minimum capital requirements for all banks despite difference in size and market.

Should we not have different conditions for small or medium banks operating on a different scale, said Ncube.

There is deep concern in the business sector coming from the financial crisis. We also have a problem with the reaction to the crisis. It risks reversing the gains we have made in the last years.

Hopefully we can come up with new measures to deal with the crisis, not measures put in place by RBZ, they will worsen the situation.

In a bid to ease liquidity challenges in the banking sector, the RBZ introduced notice periods for withdrawals upward of $10 000.

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