THE Reserve Bank of Zimbabwe (RBZ) is seeking closure of Royal Bank of Zimbabwe after the latter allegedly failed to penetrate the market since its re-registration owing to numerous challenges, the court heard.
REPORT BY CHARLES LAITON
In an application lodged at the High Court recently, the central bank said Royal Bank, which was relicensed three years ago, was critically undercapitalised, with an adjusted core capital of $1 850 000, which was far below the minimum capital requirement of $12 000 000 for commercial banks.
The RBZ said Royal Bank had continuously faced challenges characterised by inadequate capital, perpetual losses, poor asset quality, severe liquidity crunch, weak risk management and poor corporate governance practices.
It said since relicensing, Royal Bank had been using depositors’ funds to cover operational expenses resulting in a non-funded gap of $4,1 million.
“The first respondent (Royal Bank) solvency was under threat from persistent poor earnings performance and cumulative losses amounted to $5 980 000 as at June 30, 2012,” the RBZ said.
“The first respondent had failed to penetrate the market and mobilise meaningful deposits due to low market confidence and as at June 14, 2012, it had total deposits of $5,6 million.”
The central bank further said as a result of the severe liquidity crunch, Royal Bank had failed to pay statutory obligations, creditors and interest on deposits.
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“As at May 31, 2012, it had outstanding balance of $2,27 million resulting in some creditors instituting legal proceedings against it to recover their dues,” the RBZ said.
In his opposing affidavit, Royal Bank chief executive officer Jeffrey Mzwimbi said the RBZ had not been candid with the court on issues surrounding its capitalisation.
“When Royal Bank was relicenced in September 2010, RBZ issued an exemption to it from meeting the statutory capital reserve of $12 500 000 for a period of up to September 30, 2012,” Mzwimbi said.
He further argued that neither the RBZ nor the provisional liquidator had presented a current valuation of Royal Bank’s assets and a current list of creditors.
“Current position will show that the first respondent (Royal Bank) is not commercially insolvent.
“The interests of creditors, depositors and all other stakeholders can be salvaged in a better manner than the drastic measure adopted by RBZ,” Mzwimbi said.
The matter is set to be heard by Justice Francis Bere on May 8 this year.
The RBZ is being represented by Chihambakwe, Mutizwa and Partners while Aleck Mambosasa is representing the interests of the shareholders.
