Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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Pressure mounts on banks

Pressure mounts on banks

JAMA MAJOLA | 15 January, 2012 00:34

A dark cloud is hanging over several Zimbabwean commercial banks, which are 
struggling due to chronic capitalisation problems and a prolonged liquidity 
crisis in the market.

Latest information gleaned from Ministry of Finance, Reserve Bank and 
banking sector reports show only six out of 26 banks in the market are 
strong, while the rest are just keeping their heads above water.

“Six banking institutions continued to dominate the market in terms of 
deposits, commanding close to $2-billion of the total banking sector 
deposits, representing about 70% of the total market deposits,” one of the 
documents says. “CBZ Bank retains the highest systemic importance, with 
market share for deposits of close to 25%.”

Main banks in Zimbabwe in terms of core capital include CBZ, Standard 
Chartered, Barclays, Stanbic, BancABC and ZB Bank.

This means the other 20 banks are just breaking even.

ZABG is critically undercapitalised, with a negative core capital position 
of about $8-million. The deterioration in capital is attributed to 
cumulative losses for the current and prior years.

The bank has been given until September 30 2012 to meet minimum capital 
requirements following a protracted demerger process in the last quarter of 

ZABG has been trying in vain to get its major shareholders and investors to 
inject capital.

A consortium of Russian investors is said to be trying to take over the 
bank, which has requested $5-million from the Ministry of Finance to cover 
its operational expenses.

Other banks which have been struggling include ReNaissance, which is now 
under the management of a curator, TN Bank, Kingdom Bank, Genesis Investment 
Bank and Royal Bank.

Following its closure and management by a curator, ReNaissance’s future has 
become gloomy, with the old shareholders fighting vicious battles for 
ownership and control with the curator and central banks officials.

Genesis Bank has been trying to get foreign investors to strengthen its weak 
position. The central bank has approved in principle the proposed 
acquisition of a 93% stake in the bank by a consortium of investors led by 
FMB of Malawi.

Several banks failed to meet their minimum statutory capital requirements – 
a buffer against contingency risk and a cushion for depositors – last year 
due to low capitalisation and poor balance sheets. They were given new 
deadlines which stretched into this year.

The International Monetary Fund has expressed concern over “rising 
vulnerabilities in the banking system” in Zimbabwe.

The IMF has advised that small and weak banks must be recapitalised, merged 
or closed, something which several struggling banks are considering.

Owners of small banks have been hanging onto their assets, hoping to secure 
funds for capitalisation or new shareholders, something which has been 
difficult mainly due to the macro-economic environment and policy problems.

Foreign-owned banks – which underpin the banking sector – have been under 
growing threat of seizure or being pushed out of the market as they continue 
to resist government’s controversial indigenisation laws, which amount to 
expropriation disguised as empowerment.

Empowerment and Indigenisation Minister Saviour Kasukuwere has accused banks 
of defiance and has threatened punitive measures.

“We have Standard [Chartered] Bank who show a lot of disrespect for our 
laws,” Kasukuwere said recently.

“Barclays Bank is still trying to find all the excuses that it can and 
Stanbic Bank ignores its own commitments to the people of this country. It 
must be made clear to them that they will not escape the law.”

Zimbabwe experienced a chain of bank collapses in 2004 at the height of the 
economic meltdown and hyperinflation.

A number of banks are battling for survival due to poor economic 
performance, low-capacity utilisation by industry and depressed demand 
against a backdrop of low disposable incomes.


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