THE African Development Bank (AfDB) says the extension of the recapitalisation deadline for banks by the Reserve Bank of Zimbabwe (RBZ) is an indication of the ongoing liquidity crisis affecting the economy.
The banking sector has since the adoption of multiple currencies in 2009 been operating without a lender of last resort as the government continues to struggle to raise funds for the central bank further exposing local institutions.
The central bank requires $150 million for the lender of last resort function.
The central bank last year had raised the minimum capital requirements for banks to $100 million.
In its the monthly economic review for March, AfDB said the move by RBZ allowing banks to comply with the new minimum capital requirements from 2014 to 2020 will give banks more time to mobilise capital.
“Small and weak banks have challenges in mobilising new capital due to their weak balance sheets and growth prospects in an operating environment that is becoming increasingly competitive,” AfDB said in its report.
During the period under review, the central bank in consultation with the finance ministry deregistered Barbican Bank in February this year after it failed to resume banking business.
Barbican failed to resume operations due to inadequate capitalisation and lack of corporate governance and risk management structures necessary for banking business.
According to the monetary policy issued in January, 14 banks had managed to comply with part of the new minimum capital required levels, while five banking institutions had made significant progress towards compliance.
The regional lender said the move to transfer liabilities on the central bank’s balance sheet to a special purpose vehicle that will be managed by the Ministry of Finance will help the central bank to improve its credibility.
The central bank has debts in excess of $1 billion.
“With an envisaged clean balance sheet, it is expected that all the necessary reforms will be done to allow the institution to operate more effectively and more efficiently,” the report said.