BY TATIRA ZWINOIRA
The Reserve Bank of Zimbabwe (RBZ) yesterday announced new US dollar-benchmarked capital requirements for banks of up to US$30 million which it says will ensure the stability of local financial institutions.
This comes as the Zimbabwe dollar continues to lose value due to lack of market confidence, raising insolvency risk among banks.
In a statement yesterday, central bank governor John Mangudya said the RBZ’s Monetary Policy Committee (MPC) wanted banks to continue to underwrite financial transactions.
“The MPC noted the need for banks to hold sufficient capital to ensure continued stability and soundness of the financial services sector, as well as ensuring that banks continue to be able to underwrite financial transactions that are necessary for improving production and productivity,” Mangudya said.
“Tier 1 banks which refers to large indigenous commercial banks and all foreign banks, US$30 million; Tier 2 — commercial banks, merchant banks, building societies, development banks, finance and discount houses, US$20 million; Tier 3 — deposit-taking microfinance banks, US$5 million; and credit only microfinance institutions, US$25 000.”
Mangudya said banks had been given up to December 31,2020 to comply with the new minimum capital requirements.
The changes to the minimum capital requirements are from US$25 million for both tier one and two banks as well as US$5 million for deposit-taking microfinance banks under tier three.
The new minimum requirements are also a change to the levels the RBZ had ordered banks to reach by year end of US$100 million for tier 1 banks, US$25 million (tier two) and US$7,5 million (tier three).
According to Treasury, the banking sector remained adequately capitalised, with aggregate core capital of ZWL$3,59 billion as at September 30, 2019, representing a 54,08% increase from ZWL$2,33 billion in 2018.
The RBZ also said a total of ZWL$800 million has so far been disbursed under the medium-term bank accommodation window created to support banks with productive sector funding requirements.
“This amount is well within the committee’s initial target of ZWL$1 billion agreed in 2019. The bank shall continue to administer this facility while taking appropriate measures to limit its impact on inflation and the exchange rate,” Mangudya said.
The MPC at its last meeting held on January 17 also resolved to maintain the bank policy rate on overnight accommodation at 35%.