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RBZ to clean up banking sector by June

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THE Reserve Bank of Zimbabwe (RBZ) has set an ambitious target to have a financial services sector that has no distressed banks by the first half of this year.

BY VICTORIA MTOMBA

In his Monetary Policy statement released yesterday, RBZ governor John Mangudya said Metbank, Afrasia Bank Zimbabwe and Tetrad Investment Bank continued to experience liquidity and solvency challenges.

“The Reserve Bank has engaged these banking institutions’ boards and shareholders with regard to the proposed turnaround strategies,” he said.

“As monetary authorities, we continue to closely monitor progress in the implementation of the various plans. The Reserve Bank’s objective is to ensure that the financial sector is free from distressed banks by 30 June 2015.”

Mangudya said the sector now has three distressed banks after the central bank closed Capital Bank Limited and Interfin Banking Corporation. Mangudya said Allied Bank Limited’s banking licence was cancelled in January after the board of directors surrendered the licence.

MetBank, Afrasia and Tetrad have a low systemic importance, with market shares of 4,46%, 4,18% and 4,97% in terms of loans, assets and deposits as at December 31 2014.

Mangudya said credit risk remains the most significant challenge facing the banking sector while the liquidity constraints compound the smooth operation of some banking institutions.

He said after the closure of Capital and Allied banks, the sector now has 19 operating institutions: 14 commercial banks, one merchant bank, three building societies and one savings bank.

The banking sector remained profitable, with an aggregate net profit of $52,8 million for the year ended December 31 2014, that is $3,4 million above the same period in 2013.

“A total of 14 banks out of the 19 operating banking institutions recorded profits for the year ended 31 December 2014. The losses recorded by the other banking institutions are attributed to high levels of non-performing loans, liquidity constraints and incapacity to generate sufficient revenue to cover the high operating expenses,” Mangudya said.

During the year 2014, the banking sector’s core capital increased to
$811,2 million as at December 31 2014 compared to $790,4 million on December 31 2013.

A total of 13 out of 19 banking institutions currently comply with the prescribed minimum capital requirements.

“In this regard, most banking institutions have since submitted plans indicating the preferred strategic group in which they will operate effective December 2020 and the accompanying recapitalisation plans which are currently being evaluated by the Reserve Bank,” Mangudya said.

During 2014 bank deposits excluding interbank deposits grew by 13,6% to $4,4 billion from $3,9 billion due to liquidity inflows related to the tobacco selling season earlier in the year.

The banking sector deposits including interbank deposits grew by 4% to $5,1 billion.

Loans and advances were $4 billion, up from $3,7 billion in 2013.

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