THE Reserve Bank of Zimbabwe (RBZ) has extended the compliance timeline for meeting minimum capital requirements for the banking sector from next year to 2020, amid indications that some banks were struggling to comply due to empowerment regulations.
Report by Bernard Mpofu
Addressing business leaders at the Confederation of Zimbabwe Industries breakfast meeting yesterday in Harare, central bank boss Gideon Gono said biting liquidity constraints confronting the economy had made it impossible for weaker banks to raise capital locally.
The apex bank last July raised minimum capital requirements for commercial and merchant banks to $100 million from $12,5 million and $10 million respectively in a bid to minimise systemic risks in the fragile financial services sector.
Banks were expected to raise the capital in a staggered exercise that was expected to be completed by December 2014.
By last December, banks were required to have raised at least $25 million.
Concerns were, however, raised following this development that locally-owned banking institutions would face challenges in raising the revised capital.
Genesis Investment Bank has already surrendered its banking licence after it became apparent that it would not raise the capital.
“The governor was given absolute discretion (by Cabinet) to intervene and moderate in cases of genuine difficulties, so no one is going to die because they have not achieved the capital level requirements. The banking sector is aware that if there are genuine difficulties towards meeting the deadline or targets, the governor’s office is open and we will discuss,” Gono said.
“We are also mindful of the fact that some of the investors are from outside and they may be concerned about issues to do with indigenisation if they are to put in money that upsets what is on paper in terms of indigenisation. That may be the reason why certain transactions take long, but we will remain flexible.
“As a result of that we have come up with what we have called ‘Vision 2020,’ where we expect banks to have complied by 2020. We are urging industry also to come up with their 2020 visions. By the way, 2020 is not too far away in terms of weeks (I think if my arithmetic is correct, as of today, we are looking at 408 weeks to get to 31 December 2020). We need to plan, how we are going to that year, we have planned and we are saying 31 December 2020.
“I would like to see a banking sector that is fully capitalised to the tune of $100 million, a banking sector where a simple bank is capable of underwriting eight times its capital base, which will then be $800 million dollars. So I will say, let’s get on with it and let’s plan to survive despite the challenges that can get on our way.”
Latest figures released by the central bank show that 67% of banks had partially complied with the staggered capital levels as at December 31 2012. Despite complying with the revised capital requirements, foreign-owned banks are targeted for takeover under indigenisation and empowerment regulations compelling them to sell 51% shareholding to locals.
Among some of the banks that failed to raise $25 million by last December are State-owned Agribank, FBC Building Society, ZB Building Society, ZABG and Capital Bank (formerly ReNaissance Merchant Bank). The central bank, however, said banks had shown “significant progress” towards raising the prescribed capital.