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Gono left in the cold

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Government has blocked Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono’s directive to increase minimum capital requirements for banks to $100 million and ordered the central bank to maintain the status quo.

Impeccable sources told NewsDay yesterday that the Secretary to the President and Cabinet, Misheck Sibanda, wrote to Finance minister Tendai Biti, Gono and other senior government officials reversing the new capital requirements announced by the central bank boss on Tuesday.

In his Mid-Term Monetary Policy Review, Gono announced an eight-fold increase in minimum capital requirements to $100 million for commercial banks, amid fears of bank closures and forced mergers.

Merchant banks, whose current capital requirements stand at $10 million, were expected to raise $100 million capital as a last line of defence. The central bank chief also proposed to increase the minimum paid-up capital for microfinance institutions to $5 million from $1 million.

Gono said banking institutions were expected to meet the new thresholds in a phased recapitalisation exercise to be concluded in 2014.

But as first reported by NewsDay on Wednesday, well-informed sources said government officials, mainly from Zanu PF, at a high-level meeting in the capital on Tuesday, had rejected Gono’s directive, arguing it would derail the controversial indigenisation and empowerment programme.

There were also fears, the sources said, that Gono’s directive would result in the closure of mainly locally-owned banks.

The sources said Zanu PF and the MDC-T had closed ranks to reject the central bank’s proposal despite that Gono had before making it public taken it to President Robert Mugabe, who had okayed it.

“A decision was taken at a high-level government meeting to stop the central bank from increasing the paid-up minimum capital prescribed by the Reserve Bank,” one of the sources said. “The issue was also discussed and faced opposition during party meetings for Zanu PF and MDC-T.
The general feeling was that most banks, particularly local banks, would struggle to meet the new capital requirements. More so, some viewed the proposal as an anti-indigenisation drive.”
Efforts to get a comment from Sibanda yesterday were in vain.

When reached for comment on the outcry over his proposed minimum capital requirements, Gono said the proposals were meant to strengthen the country’s banking system.

He added that the proposal were a “sanctions-busting” measure that would minimise systemic risks in the fragile financial services sector.

“My vision and that of RBZ board as well as the Monetary Policy Committee is to see the emergence of strong indigenous giants out of today’s weak banks like the HSBCs, Absa’s, Barclays and Stancharts of this world out of the amalgamation and sharing of expertise and knowledge among current fragmented banking institutions,” Gono said.

“I am upset by the egoistic personal, selfish manner in which some commentators have approached these proposals. To me, people seem to be reacting to headlines without taking time to understand the details of my monetary policy statement. We must stop being afraid of taking bold and prudential decisions when they are needed.”

Moves to resist the upward review of the minimum capital requirements follow the struggle by indigenous banks to raise the current
$12,5 million.

Royal Bank and Genesis Merchant Bank recently surrendered their banking licences after they failed to meet the central bank requirements. The banks failed to meet the requirements despite being granted several grace periods to comply.

Mines and Mining Development minister Obert Mpofu, through Trebo&Khays, early this year came to the rescue of the Zimbabwe Allied Banking Group after injecting capital to plug a $15 million hole.

Kingdom Bank, now AfrAsia Kingdom, had to turn to Mauritius-based banking group AfrAsia who injected $9,5 million in exchange for a 35% stake.

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