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Interbank facility nears completion


The Reserve Bank of Zimbabwe (RBZ) is testing the systems ahead of the implementation of an interbank facility meant to unlock idle surplus funds at some banks.


RBZ governor John Mangudya yesterday told NewsDay that the interbank facility would soon be running after tying loose ends.
The facility is guaranteed by African Export-Import Bank (Afreximbank) up to $100 million.

“We have been working on the documentation for the past two weeks and this week we will start testing the systems that include proof of documentation and the legal processes,” Mangudya said.
He said the surplus bank collection account has been set up and Afreximbank would fund the deficit banks.

“If there is a failure they will get their money from Afreximbank. We are matching interest rates, discount for purpose of what rate would be offered to the surplus banks and what rate will be charged to the deficit banks,” Mangudya said.

The interbank lending market is a market in which banks extend loans to one another for a specified term. Most interbank loans are for maturities of one week or less, the majority being overnight.

Banks borrow and lend in the interbank lending market in order to manage liquidity and satisfy regulations such as reserve requirements. The interest rate charged depends on the availability of money in the market.

In his monetary policy statement, Mangudya said the Afreximbank Trade Debt Backed Securities (Aftrades) were operational.

The central bank would manage the facility and act as the agent bank for Afreximbank for the purposes of managing the surplus and deficit participants’ requirements under Aftrades.

Mangudya said the initial borrowers under Aftrades have already been assessed and approved by Afreximbank.

He said lending to these approved banks would be strictly against acceptable collateral.

The interbank market facility is expected to address the liquidity challenges in the financial sector.

The facility will be used as a precursor programme for the lender of last resort function by the central bank.

In March last year Afreximbank launched a $100 million facility to revive the interbank market and increase liquidity.

The banking sector has been operating without an active interbank market under the multi-currency regime introduced in 2009 due to the absence of acceptable collateral.

This resulted in the market being segmented with some banks having huge surpluses while others had liquidity challenges.

Under normal circumstances, liquidity would have moved from the surplus institutions to those experiencing shortages through the interbank market.

Banks with excess liquidity were averse to lending to those experiencing shortages due to credit risk issues associated with those institutions.

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