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NewsDay

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Banking profession under siege

Opinion & Analysis
In about two weeks’ time, bankers will embark on their annual pilgrimage to the IOBZ Winter Banking School in Nyanga. It is an important gathering that provides “big picture” perspectives. As they say, it is difficult to see the picture when you are in the frame so for a change — even if it’s only […]

In about two weeks’ time, bankers will embark on their annual pilgrimage to the IOBZ Winter Banking School in Nyanga. It is an important gathering that provides “big picture” perspectives. As they say, it is difficult to see the picture when you are in the frame so for a change — even if it’s only for a few days — bankers can savour sector-wide viewpoints without the usual narrow concerns of individual banks and the attendant pressure of daily deadlines.

Bankers are no doubt looking forward to fruitful deliberations and new insights in Nyanga, but in the meantime they will have to admit the banking profession is under siege. So, how did we come to be on such tenterhooks and what can be done to restore the good name of the profession, or at least limit the damage?

For want of a better analogy, the effect of dollarisation on the banking sector in early 2009 can be likened to trying to re-engineer a Boeing 747 in mid-air, and expect it to remain airborne. From a situation of having almost no foreign currency resources of their own, banks had to painstakingly reconstruct balance sheets in order to service the credit needs of the real sector while dealing with cost structures that hardened overnight to unsustainable levels.

All this was against the background of limited opportunities for commensurate income generation. Despite these challenges, the sector has done quite well to lead the country’s recovery efforts, but recent developments in the sector threaten to undo all that good work. The banking profession stands at a cross roads, facing a major crisis of confidence.

Widely credited for stabilising economic fundamentals, dollarisation’s major side-effect appears to have been unleashing the liquidity squeeze that has exposed Zimbabwean bankers and sullied reputations. In the process those who butter the daily bread – lenders, depositors and the transacting public — have been alienated. In late 2009 Kingdom Financial Holdings chief executive Lynn Mukonoweshuro suggested that the government and quasi-government institutions should spread their deposits across all banking institutions.

The closure of Interfin Banking Corporation and Genesis Investment Bank, coming as it does barely a year after the challenges at ReNaissance in 2011, has considerably weakened this call for preferential treatment of indigenous banks for purposes of handling government banking business and facilities such as ZETREF.

Against this background, a troublesome question is being asked persistently and it needs to be answered in the most convincing manner possible at the Winter Banking School: Can locals run banks or do they just run them down?

Lately, the media has gone into a name-calling overdrive, characterising bankers as “overrated briefcase bankers with no ethics at all”, “these crooks in suits and ties”, “these thieves in imported designer suits”, “charlatans who don’t understand the intricacies or nuances of this very technical sector; lacking understanding of its ethos and ethics” and “criminals masquerading as bankers”.

There are as many viewpoints as there are viewers on the subject of what can be done to begin to repair bankers’ damaged reputation and restore public trust. Below, I offer my two-cents worth on what I consider to be the way forward.

Firstly, the view that owning a bank is the best way of “feathering one’s nest” or “lining one’s pockets” at that expense of depositors has gained much currency and it needs to be dispelled, whether it is true or not.

Secondly, bankers have to re-imagine their relationships with their various publics (the media, transacting public, regulators, government etc) in order to reduce the gap between perception and reality. Recently, Bankers’ Association of Zimbabwe (BAZ) president George Guvamatanga said that the association recognises the importance of an educational campaign that increases the understanding of banking services across the country and will therefore seek to increase informative channels that financially empower the public. That would be a good starting point, if we can get around to it. It is also a good thing that BAZ recognises that transparency and integrity are important aspects in gaining the public’s confidence.

Bankers must prioritise and actively promote self-regulation if they are to avoid becoming the “flavour of the month” as far as scapegoats go. The BAZ could play a bigger role in disciplining its own members according to an agreed code of conduct that builds on the Code of Banking Practice. Suggestions have been made for adoption of a system akin to that of the Law Society of Zimbabwe under which members are struck off the register for acts of misconduct. Bankers have to design an end-games that is are line with their interests; otherwise they will be designed by others in ways they will not necessarily like.

Disclosure of executive compensation is gaining traction worldwide both as a principle of sustainable banking and as a way of promoting transparency. Continuing to ignore this trend in Zimbabwe, especially if no discernible efforts are made to narrow the gap between executive and worker compensation, means perceived huge disparities will continue to feed into the public’s resentment of bankers as a privileged and self-serving lot.

The work is cut out for bankers and there is no doubt that they will rise to the occasion. As Jaffar Hussein, the former Malaysian Central Bank governor once famously said: “Good bankers, like good tea, can only be appreciated when they are in hot water.”

Weigh in with your insights on [email protected].

Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory company with interests in banking, technology and agriculture as well as the convergence area among others.