RBZ urges struggling banks to recapitalise

Published: 05 February 2014

THE Reserve Bank of Zimbabwe (RBZ) has urged banking institutions facing operational constraints to take concrete steps towards recapitalisation amid concerns that potential suitors are reluctant to inject funding into a bank with serious challenges.

Of late, the central bank has observed that some banks were facing challenges including undercapitalisation, high levels of non-performing loans, poor earnings performance and liquidity constraints.

Capital requirements for banks remain at present levels of $25 million for commercial banks, $25 million for merchant banks, $20million for building societies, $15million for discount and finance houses and $5 million for microfinance banks.

Presenting the 2014 monetary policy statement last week, RBZ acting Governor Dr Charity Dhliwayo stated that they have observed that some banks have capitalisation plans which lack credibility and substance and seem to be designed, in some cases, to buy time.

"Notably, some banks are taking years to finalise their capitalisation.

"Further, we have noted with concern that there are some banking institutions that are reluctant to consolidate their operations or merge with other institutions where this is considered to be a viable option," she said.

She challenged banks to put finality in the implementation of their capitalisation plans in a timely fashion and not wait for their condition to deteriorate to a point of no return.

"In view of the foregoing, the Reserve Bank will expect banking institutions facing challenges to immediately take concrete steps towards the implementation of the following to consolidate and or merge, dilution of shareholding by potential investors, and converting their banking licences to deposit taking microfinance institutions (microfinance banks)."

Dr Dhliwayo said where a banking institution has failed to resolve its challenges, the central bank would institute appropriate supervisory action.

The RBZ in conjunction with the Ministry of Finance and Economic Development are proposing amendments to the legal and regulatory framework to promote effective resolution of troubled banks.

- chronicle

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