via ‘Banking sector stable, but unsafe’ – DailyNews Live 28 October 2014
HARARE – Zimbabwe’s banking sector remains stable despite systemic risks posed by struggling banks, but the Central Bank must strengthen supervision of financial institutions, an analyst says.
This comes amid growing concern that several banks — which are undercapitalised and have shown signs of strain — could collapse, causing a contagion effect and panic across the financial sector.
In August, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya acknowledged in his monetary policy statement that three banks — AfrAsia, Metbank and Allied — were facing capitalisation challenges.
He said the central bank was negotiating with the institutions’ shareholders concerning boosting their capital in line with RBZ requirements.
Christopher Mugaga, an economist, told businessdaily that although the “banking sector is stable, it is not safe, with signs of widening cracks in the quality of assets”.
He said the state of affairs “calls for urgent attention”. He added that the central bank must “put in place measures to strengthen the fragile financial services sector”.
In a banking industry quarterly economic report released recently, the RBZ said notwithstanding the challenging operating environment, the banking sector remained generally stable.
“The banking sector remains well capitalised with 14 out of the 20 operating institutions compliant with the minimum capital requirements as at June 30, 2014. The remaining non-compliant banks have embarked on capital raising initiatives to strengthen their capital positions,” said the central bank.
According to the RBZ, the banking sector remained profitable with an aggregate net profit of $26,53 million in the half year to June 2014, up from $4,90 million realised in the corresponding period ended June 2013.
A total of 13 banks out of the 20 operating banking institutions recorded profits for the half year ended June 2014.
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