One bank exceeds $100m minimum capital requirement

Published: 10 July 2014

Zimbabwe's banking sector has witnessed a 2,5 percent and 3,6 percent decline in net capital and core capital levels, respectively as at the end of the first quarter, the Reserve Bank of Zimbabwe has said.

In its Banking Sector Report for Quarter ended 31 March 2014, the monetary authority noted that continued losses by the six non-compliant banks had resulted in the dilution of the core capital during the period under review (Capital Bank has however since relinquished its license).

"On aggregate, as at 31 March 2014 the banking sector was capitalised to the tune of $909 million and $755 million in terms of net capital and core capital respectively, compared to $933 million and $784 million as at 31 December 2013.

"Core Capital diminution is largely attributed to losses incurred by the non compliant banks during the quarter under review," said RBZ.

However one commercial bank has surpassed the $100 million minimum capital requirement that will become effective in 2020 said the RBZ.

Without revealing the name of the biddable financial institution, the central bank however noted that the compliance levels had remained the same as at the end of the year.

"One banking institution has already surpassed the $100 million minimum capital requirement which is effective 2020. As at 31 March 2014, a total of 14 out of 20 operating banking institutions were in compliance with the prescribed minimum capital requirements.

"The compliance levels are the same as at 31 December 2013. Non-compliant banks are taking various measures to regularise their capital positions which are at different stages of implementation," reads the report.

The report seems to be pointing out that the local financial services sector is dominated by very few banks as report's figures show that five banks hold over 60 percent of total deposits, and one bank holding just under a third of total deposits of $4,82 billion.

"As at 31 March 2014, five (5) banking institutions held cumulative deposits amounting to $3,02 billion, representing 61,72 percent of total banking sector.

"One banking institution continued to account for the largest share of total deposits, with deposits amounting to $1,46 billion and representing 29,88 percent of total banking sector deposits," said RBZ in the report.

In a statement on the conclusion of the 2014 Article IV Consultation with Zimbabwe last month, the International Monetary Fund (IMF) recommended "continued vigilance in monitoring weak banks and a proactive approach to ensure an orderly resolution of insolvent non-systemic banks."

According to the RBZ, the banking sector is 'stable' despite the existing challenges of transitory deposits, limited inter-bank trading, general market illiquidity and limited lender of last resort function.

Notably, for the first quarter the banking sector achieved an aggregate net profit of $20,4 million up from $0,47 million during the parallel period last year, figures show.

Last week, Finance Minister Patrick Chinamasa said although five banks were "ill" this would not have a contagion effect on the broader banking sector as these were small banks.
- BH24