Collateral damage over bond notes

Stanbic Bank Zimbabwe Limited is set to amend its terms and conditions, which will put withdrawal restrictions and make customers acknowledge that a deposit may not be immediately available for withdrawal.

Source: Collateral damage over bond notes – NewsDay Zimbabwe November 3, 2016


In a notice to its depositors, Stanbic said the amendments would come into effect in 30 days.

The notice is dated November 1, a day after the promulgation of a law paving the way for the introduction of bond notes.

The amendments are applicable to all loans, overdrafts, and all other banking facilities offered by Stanbic.

Under sub-section 16, titled “Payment in legal tender recognised in Zimbabwe” it states: “[You, the client, the depositor] acknowledge that a deposit, regardless of the currency of such deposit, may not be immediately, available for withdrawal by you.”

The depositors have to agree that the withdrawal of funds from accounts, regardless of the currency of such deposit or the currency of the funds withdrawal request, was not unconditional and may be delayed.

“This is subject to the availability of such currency notes and or any interruption, interception/or suspension to the banking system and/or compulsion by any authority to apply or convert the proceeds of deposits to other asset classes or currencies, which may not be freely exchangeable, redeemable, convertible, negotiable or otherwise immediately available for withdrawal by the depositor.

“In addition, the bank shall be entitled to impose withdrawal limitations or restrictions and may from time to time impose requirements for prior written notification of your intention to make a withdrawal.”

On the payment in legal tender recognised in Zimbabwe category, the bank said it reserved the right to pay funds in one or more other currency or currency unit recognised at that time as legal tender.

The move comes as the banking sector takes precautionary measures ahead of the launch of the bond notes following the promulgation of a law on Monday allowing the introduction of the surrogate currency.

The bond notes are coming as an export incentive under the $200 million facility guaranteed by the African Export-Import Bank, with the awareness campaign already in motion.

Currently, Stanbic Bank Zimbabwe is allowing a maximum daily withdrawal of $100, which depositors have been rushing to get amid the looming bond notes.

“We understand that market conditions can often be challenging and in this regard we wish to assure you of our best service at all times. This extends to ensuring that the terms and conditions of the accounts we operate are up to date and in line with best practice,” Stanbic Bank Zimbabwe CEO, Joshua Tapambgwa said.

He said the terms and conditions were in line with the group’s policy and consistent with those that apply in other countries that form part of the Standard Bank Group, as well as other banks within its jurisdiction.

A financial analyst said these new changes revealed that banks were now taking a cautious approach, having experienced cases of litigation and were covering their backs in case of possible lawsuits sparked by shortage of cash and the introduction of bond notes.

In reality, the analyst said, the new amendments were a response to the recent law making bond notes legal, which President Robert Mugabe gazetted on Monday in Statutory Instrument 133 of 2016.

“The statutory instrument means that everyone will be compelled to accept them as legal tender. While the Reserve Bank of Zimbabwe (RBZ) strongly believes that the bond notes will exchange at par with the US dollar, this only applies in the formal system. The exchange rate in the informal sector will be determined by real economic fundamentals and of course speculative behaviours among the people,” the analyst said.

“Some banks have gone a step further to cover their backs in the event that the bond notes trade lower in the informal market by ensuring that they will not be compelled to pay rates that are not prescribed by RBZ for any currency conversion to bond notes.”

Analysts feared that other banks would soon follow the Stanbic route to safeguard themselves against possible litigation. Stanbic is the second largest capitalised bank after CBZ Bank, with a capital position of $96,47 million against the minimum required threshold of $25 million. In 2015, the bank had the third largest deposit market share, with $484,05 million.

“More restrictions will be in place and it will tough for depositors. However, it will work against building confidence in the banking sector and we can say goodbye to the financial inclusion drive. That era of putting money under the pillow is back,” a banker warned yesterday.

Zimbabweans view the bond notes as a plan to bring back the Zimbabwean dollar, which was demonitised last year. The fears stem from the inconsistencies on the part of the monetary authorities on how the bond notes would work.

But RBZ insists it would not print bond notes above $200 million, with central bank governor, John Mangudya saying he would resign if his plan failed.