Depositors suffer as bankers live large | The Herald

via Depositors suffer . . . as bankers live large | The Herald December 9, 2013

Trust Bank became the fourth bank to be closed since dollarisation while Capital Bank is winding down operations after failing to attain viability. At the same time, there are indications that Allied Bank might follow the same route and that the situation at Tetrad Investment Bank has just started to boil over.

All these events have raised the issue of whether the Government should be doing more to regulate the operations of the banks and prevent such losses particularly on depositors. The lack of even a single arrest or prosecution of these bankers who selfishly abuse depositors’ hard-earned funds is fomenting financial impropriety after which founding directors continue to live lavish lifestyles, driving sleek top of the range vehicles and being show-offs in social places.

The poor and unsuspecting depositor in the meantime is wallowing in anguish and poverty and faces the possibility of an even bleaker Christmas, simply because the banking regulations are too weak to deal with the failed bankers. Continued failure of indigenous banks will certainly further dent public confidence in the operations of banks, which is believed to be the reason why an estimated US$4 billion is thought to be circulating outside the banking sector. President Mugabe at the launch of the Finscope SME survey in June this year slammed some indigenous bankers for abusing depositors’ funds through a get-rich-quick mentality.

The point is, people will always remember especially when it comes to where they keep their money. Banking is all about trust. That’s why one of the current shining lights, never mind the low level publicity in the locally owned banks, is NMB Bank. The bank is profitable and strong not only because it restructured quickly and set about raising capital early on post dollarisation. Never mind that the logos and colours look archaic and tired. The bank is performing solidly because it has managed to retain the trust of its clients.

The failed banks have huge loan exposures to related parties while at the same time most of them have a high concentration risks in its deposits.  The biggest problem is that the directors wrongly adopted the model of diversified investment or risk spreading as was the case at Interfin. An approach which has failed to work in this dollarised environment. What happens when the flood of credit-fuelled investment schemes that lifted all investment boats in recent years begins to subside? The answer is, everything that went up together starts to go down together, and diversified portfolios will sink with it.

Royal Bank surrendered its licence last year in June after the Reserve Bank discovered the directors of the institution were involved in serious abuse of depositors’ funds. At that time, the bank was burdened by non-performing insider loans.  Royal, like Trust Bank, had been reissued with a licence after suffering the same fate in 2004.

When Royal shareholders surrendered their licence, the bank had a thin capital base of US$1,9 million against the requisite US$12,5 million for commercial banks and cumulative losses of US$6 million to June 2012. About 99,2 percent of the bank’s portfolio was not performing while some shareholders refused to sign off its accounts.

The Royal Bank closure fell hard on the heels of Interfin Bank’s placement under curatorship and Genesis Investment Bank voluntary surrender of its banking license after failing to meet minimum capital thresholds. Royal Bank was founded in 2001 but three years later, the Reserve Bank closed it together with Barbican Bank and Trust.

Renaissance Merchant Bank, now, Capital Bank was placed under curatorship in June 2011 after it emerged top shareholders of its holding company borrowed millions of dollars of depositors’ funds in breach of banking regulations, driving the bank into negative equity.

Central to the outflow of cash to top shareholders was Mr Patterson Timba, who was the largest shareholder and effective controlling shareholder in Renaissance Financial Holdings, which owned 100 percent of Renaissance Merchant Bank.  Investigations by the Reserve Bank of Zimbabwe found the two borrowed millions of dollars through loan schemes that had not been sanctioned by the systems the bank was supposed to use.

The unsanctioned loans taken by the directors left the bank with a capital deficit of US$16,6 million and in need of a capital injection of US$31 million to restore the capital base to the required levels at that time. The central bank probe also established that besides taking the lion’s share of the bank’s loans, Mr Timba also compromised the bank’s liquidity through obtaining loans or funds from other financial institutions on the back of money market deposits placed by Renaissance.

Herein lies the challenge facing the new governor; more action is needed to reduce risks posed by the country’s banks to the broader economy. The sooner the Banking Act is amended to give more protection to depositors and to punish rogue bankers, the better it will be for the banking sector bearing in mind stability in the banking sector is an indispensable necessary condition for macroeconomic stability, rapid economic growth and broad-based social development.



  • comment-avatar
    Kalusha 8 years ago

    It’s difficult to support our own indeginous people because of kiya kiya attidute

  • comment-avatar
    Charlie Cochrane 8 years ago

    Nothing new here………indigenous thieves stealing from indigenous workers to fund Western lifestyles and doing so with impunity………..why?
    Because mugabe is the biggest indigenous thief and murderer in the country.The fish certainly does rot from the head and we can smell it from here!!

  • comment-avatar
    easily fooled 8 years ago

    A daft reporter, a company is a legal personae, with capacity to sue and be sued in its own name. Due to sheer jealous or petty jealous after all, some viable banks were incerated by the gvt thru RBZ, the effect of whc being to introduce the risk of reputation. The next stage was failure to attract depositors, partners, and relevant business. If, in such a small country with about 10 banks, 4 fails, then the problem cant be failing banks but the government, regulators etc. The owners are smart, knowing the animal the deal with, they diversified into many industries and country, so hv eggs in different baskets, so they will enjoy the soup from other baskets

  • comment-avatar
    easily fooled 8 years ago

    I give thumps up to owners of the failed banks!!!!!!!! Typical people with Zimbabwe at heart, they have fought this corrupt regime, remaining steadfast. Considering what is coming up now, the government (bad debt after all) is inheritting the debt of another bad debt (RBZ) of close to $1b. (These are US$). It shows a bad parent, who has shown her son that she is irresponsible from day 1, nursing and naturing her son in a tavern, then expect him to be a priest of Israel. Lol.

    If anything, RBZ failed banks, expropriating their money without re-imbursement. The bad debts sitting on Trust bank books since inception were government owned companies, parastals like Zisco Steel, Air Zimbabwe, NRZ etc. In other words it is the government failing these banks. What is Agribank doing? Who are borrowers? Who capitalise it? Where does the capitalisation come from?

    Zimbabwe is now a colony to Mugabe and the team of corrupt government officials, RBZ being a partner.

  • comment-avatar

    Depositors suffer as bankers live large. You are absolutely right but let us go to the very root of the problem, ‘Zimbabwe suffers as leaders live large.” maybe you could do an article on that and I will buy the Herald for the first time in about 14 years,

  • comment-avatar
    Roberta Mugarbage 6 years ago

    Banking is a matter of trust. African bankers have yet to earn that quality and they are doing a poor job in Africa.
    With an average income of 150$ a month, the ordinary Zimbabwean has little need for banking. A simple sigare box will do fine.
    If however, ordinary black thief as you are, you want your stolen money to be safe, put it where Mugabe puts it, in Switzerland or Singapore.