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RESERVE Bank of Zimbabwe (RBZ) governor Gideon Gono this week gave several local banks failing to meet their minimum capital requirements effectively two months to comply or face closure.
The move came as reports continued to swirl within the volatile financial services sector that a number of banks are struggling due to chronic liquidity problems gripping the market.
Although Gono tried to calm nerves, saying the banking remains largely “safe and sound”, he also admitted there are serious problems facing financial institutions. These include volatile deposits, absence of an active inter-bank market, lack of an effective lender of last resort function by the RBZ, market illiquidity, cash-based transactions and limited access to external credit lines.
For some months now a number of banks have been battling for survival due to poor economic performance, low-capacity utilisation by industry and depressed demand against a backdrop of low disposable incomes.
The tight liquidity conditions are mainly attributable to volatile short-term transitory deposits and limited lines of credit. Low savings due to poor salaries and wages, low interest income against high operating costs and low capitalisation exacerbate the situation.
Last week Finance minister Tendai Biti admitted Zimbabwe was reeling from a liquidity crisis and tried to make interventions in the market to improve the situation. The minister came up with several measures, including improving lines of credit and the central bank’s lender of last resort position.
Gono also came up with some interventions in a bid to deal with the worsening liquidity crisis, delayed cash transactions and illegal externalisation of money. In line with what Biti had indicated last week, Gono said there is need to stagger high value transactions to allow banks sufficient time to prepare how to handle the situation.
All these market interventions were necessitated by the deteriorating liquidity situation.
In a move which showed clearly the central bank was getting impatient with weak and vulnerable banks squatting in the market, Gono gave the struggling institutions an April 1 deadline to meet minimum capital requirements or face closure.
At least four banks are struggling to meet their minimum capital requirements, while one’s operating licence is in the process of being withdrawn.
According to Gono, as at December 31 2011, 20 out of 25 operating banking institutions (excluding POSB) were in compliance with the prescribed minimum capital requirements, while all the 16 asset management companies were compliant.
In a further bid to allay fears of a potential collapse of the banking sector reminiscent of the 2004 situation, Gono further said: “The weak and troubled banks in the sector are few, small and of low systemic importance. Collectively, as at 31 December 2011, these institutions had a combined market share below 5%in terms of total assets, deposits and loans.”
However, market watchers say only six out of 26 banks are strong, while the rest are battling for survival. The six banking institutions, CBZ, Standard Chartered, Barclays, Stanbic, BancABC and ZB Bank, continue to dominate the market in terms of deposits.
There is also growing speculation that even big banks are squeezed due to precarious loan to deposit ratios.
Whatever the situation, the most important thing now is that Biti and Gono must keep the banking sector stable. The stability of the financial sector is very critical to the shape and health of the economy. There is an empirical link between the banking sector and economic output and growth. Banking sector stability is an important driver of economic output and growth.
Periods of instability within the banking sector have often been followed by a decrease in real output growth. It is also true periods of banking sector instability have a greater impact on output growth than stable periods.
So in this case, responsible authorities must quickly fix the banking sector situation to ensure stability and sustain the current economic recovery and growth trends.
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For the past two weeks the people at the local Multichoice have shown cusomer abuse at its best. For the past 10 days and counting we have not been able to access some channels on their compact bouquet.Here is where the heartbreaks starts..they list a number for complaints that no one will pick up, if you get through 24 hours later you are lied to , the e mail help desk is manned by either a real sadist or a clown of the macabre,they dont mind giving you a number that does not work and tell you that you either take it or lump it..because what does it mean when they state in their correspondence this:"there is no need to reply to this message"? When you visit their offices in Avondale the party that should a*sist you is either gone out to lunch or indisposed..Dollars dont come easy, when we opted for the DSTV alternative we thought we were running away from ZBC but now it turns out its out of the pan into the fire..Multichoice Zimbabwe should close their customer service department, as it is, it probably is responsible for all the high blood pressure cases at the nearby hospital. And by the way does the consumer council still exist and if they do what do they have to say at the shoddy level of service people are receiving across the board not just at Multichoice.
I think Multichoice might have to think very carefully about retraining their customer service personnel but I dont hold out much hope because I have had correspondence from the team leader and I wept..still am weeping..
Could you please be kind and look into the goings on at the two organisations namely Multichoice Zimbabwe and Consumer Council of Zimbabwe...please.