Flush out 'rogue' bankers, new RBZ chief urged

Published: 08 April 2014

Former Finance minister Tendai Biti has urged new Reserve Bank of Zimbabwe governor John Mangudya to wield the axe on ‘rogue' bankers whom he accuses of pervading the financial sector.

Mangudya - currently chief executive of Zimbabwe's largest financial group by assets, CBZ Holdings - assumes office on May 1.

He takes over from Gideon Gono following the expiry of his 10-year tenure.

His appointment coincides with the collapse of several indigenous banks, with some vulnerable, due to malpractice and mismanagement, leading to loss of depositor trust in the institutions.

Biti said what is key among Mangudya's tasks "is to ensure that there is financial sector stability".

"There are people that are calling themselves bankers who have no business to be in business of banking," the ex-Treasury chief told Business Live.

"There are lots of banks that are very vulnerable at the present moment. So he has to clean up that mess arising from these vulnerable banks otherwise we will develop a systemic collapse of the banking system."

"And the banking system will remain with CBZ, Standard Bank, Standard Chartered Bank, MBCA and of course, Barclays Bank and you don't want that situation," warned Biti.

Zimbabwe has had bank failures largely blamed on wilful violation of corporate governance and funding of lavish lifestyles by ‘rogue' bankers.

Currently, the banking industry is battling a severe liquidity crunch whose tremors are being felt in some of the indigenous banks which have been red flagged by the central bank.

Biti also expects Mangudya to improve liquidity and restore inter-bank lending, which has been absent for more than a decade.

"The banking system has to be oiled so one of his tasks is how do we deal with the liquidity crunch? He also needs to restore inter-bank lending. Inter-bank lending is key and is connected to the liquidity crisis," he said.

"He must restore the lender of last resort function. Of course he needs support of central government. Part of restoring the lender of last resort is ensuring that the bank book is zero."

"The government has said it is

going to take over the debt of the RBZ so he must push that they do that as a matter of urgency so that he operates with a clean balance sheet," Biti said.

He urged Mangudya to ensure that the central bank defines the over rate to avoid "incestuous, usurious rates of interest of 30 percent, 45 percent and 70 percent."
- Business Live