6 banks fail to meet RBZ minimum capitalisation

via 6 banks fail to meet RBZ minimum capitalisation – DailyNews Live 3 DECEMBER 2014 by JOHN KACHEMBERE

HARARE – Six banks have failed to meet the Reserve Bank of Zimbabwe (RBZ)’s $25 million minimum capitalisation whose deadline was June 2014, Finance minister Patrick Chinamasa has said.

As at September 30, 2014, only 14 out of 20 operating banks — excluding POSB — were in compliance with the prescribed capital requirements.

At the time, Metbank, AfrAsia, Allied, Agribank and Tetrad Investment Bank had capitalisation of -$3 million, $13 million, $3 million, $8,9 million and -19,7 million respectively.

On the building societies, Chinamasa said ZB Financial Holdings’ mortgage lender was just $3 million shy of reaching the $20 million minimum capital threshold.

This comes as the central bank early this year extended the deadline for bank’s $100 million minimum capital requirement from June 2014 to December 2020.

Despite the reprieve, the financial institutions were still expected to have a minimum capital of $25 million in their coffers by June 2014.

Chinamasa, however, said the troubled banks do not pose any systemic risks to the banking sector. He added that a number of reforms were being instituted to strengthen the sector.

“These reforms have been necessitated by the need to strengthen the regulatory and supervisory framework as well as enhance financial stability,” he said in his 2015 National Budget.

In the 10 months to October this year, total banking sector deposits increased by 8,3 percent from $4,8 billion to $5,2 billion. Growth during the corresponding period last year was 7,9 percent.

Chinamasa noted that long-term deposits were also beginning to show some signs of growth, increasing from $700,9 million in October, 2013 to $1,02 billion by October 2014.

“However, demand deposits continue to dominate, comprising close to 48,6 percent of total banking sector deposits. Long-term deposits are 19,4 percent, while those under 30 days account for 19 percent, and savings deposits, 13 percent,” he said.

As at end October 2014, total banking sector loans and advances grew by 6,2 percent to $3,86 billion, against $3,64 billion in October, 2013.

“The banking sector’s lending remains largely skewed towards unsecured loans to individuals, due to associated low risk as repayments are deductions at source,” said the Finance minister.

In the period under review the ratio of non-performing loans stands at 20,14 percent, a development market experts said contributed to economic stagnation as resources are locked in unproductive projects, thus hindering economic growth and economic efficiency.