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By Paul Nyakazeya
RESERVE Bank of Zimbabwe Governor Gideon Gono is compiling a comprehensive report on the soundness of each bank to be presented on June 1 along with measures the central bank will take on financial institutions found wanting.
Gono told the Zimbabwe Independent yesterday that the banking sector report would be presented a day after the central bank’s board meeting to dissect the report’s findings.
“The report will deal with the status of individual banks and their state of soundness as well as the way forward in respect of those deemed to be falling short of our expectations in terms of safety and soundness,” Gono said.
Finance minister Tendai Biti recently expressed strong sentiments about the high loans default rate amid fears that this could trigger a major banking crisis.
In his update on Zimbabwe’s economic performance for the first quarter of this year, Biti revealed that about 34% of bank loans had not been repaid.
Biti also expressed concerns about the high level of loan-to-deposit ratio, which stood at 76%, and suggested that the sector faced a loan default risk.
This ratio is unsustainable in the face of the prevailing liquidity crisis and the high rate of loan defaults, analysts said. A loan-to-deposit ratio of up to 80% is acceptable in a developing liquid economy.
As a result, national treasury directed the RBZ to correct the precarious situation before the bubble bursts.
The present scenario surprisingly comes against the backdrop of reports by fiscal and monetary authorities last year that banks were reluctant to extend loans.
“The banking system remains vulnerable with weak capitalisation, rising non-performing loans and a tight liquidity situation,” Biti said. “Non-compliance to minimum capital adequacy threshold requirements by small banks is worsening vulnerabilities in the sector,” he said.
Bankers Association of Zimbabwe president John Mushayavanhu last night said all banks were sound.
“As BAZ, according to the information we have, there is no bank that is not sound, and as such, this does not put depositors’ money at risk. But the Reserve Bank’s arm which supervises banks should have more information on that,” Mushayavanhu said.
In January, bank deposits stood at US$2,36 billion, increased to US$2,4 billion in February and ended the first quarter in March at US$2,57 billion. On the other hand, loans increased from US$1,81 billion in January to US$1,88 billion in February and then to US$1,99 billion, representing a loan deposit ratio of 77,3%.
Despite the growth in the deposits base, interest on savings of 1% has remained largely low, but interest on savings of up to three months has improved to between 9% and 12%.
However, lending rates have remained unsustainably high, ranging between 15% and 30% with over 90% in short term loans.
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