ZIMBABWE’S central bank faces a major task in its implementation of the Zimbabwe Allied Banking Group (ZabG), a mooted financial behemoth set to ease pain associated with collapsed banks
and loss of savings by thousands of depositors in local institutions, analysts said this week.
However, time remains the single largest factor militating against this otherwise noble idea.
The analysts said Gideon Gono’s Reserve Bank of Zimbabwe (RBZ) was racing against time in trying to fully operationalise Harare’s newest and biggest bank – at least by its vaunted $2 trillion capitalisation.
But Gono boldly declared that he would meet all administrative, compliance, logistical and consultancy issues within the 60-day period to year end.
He said this as he was delivering his third monetary policy statement in Harare on Thursday last week.
Much as the central bank has already applied to the company registry for ZABG’s incorporation, via a succession of little-known Tidestock Investments, questions still linger as to whether the RBZ has enough time to thoroughly evaluate worthy investments – from the litany of collapsed banks – for inheritance and collation into ZABG.
This, analysts said, posed a great challenge and requires more than ingenuity for RBZ bosses to circumvent this logistical nightmare.
There are seven big and small banks at Gono’s disposal and the vast majority of them could be totally bust.
Barbican Asset Management, ENG Capital and Rapid Discount are confirmed casualties, while Intermarket Banking and Discount House, Royal Bank, Time Bank and Trust are some of the institutions under curatorship.
Gono also faces a stern test in addressing human resources issues, not least legalities pertaining to taking over the failed banks.
Realistically, he finds himself between a rock and a hard place because he ought to decide who is to go and who is to stay.
The central bank has already stated that there is going to be strict vetting of candidates, particularly envisaged managers of the project, and so retrenchments are looming.
Said one analyst: “This is going to be a very stressful period. I foresee a situation where people would have to devote much of their time at the office just to meet the deadline.
“There is going to be a thorough screening process of the personnel for the five divisions but the challenge we will face is who will be retained from the institutions that are currently under curatorship or who will be the new personnel.”
He added that although emphasis was on firms placed under receivership, if liquidity problems persist at others, more could actually be collapsed into ZABG.
“The central bank will be racing against time for the next two months. Although the idea is noble, decisions have to be taken such as which branches to close, which personnel will be retrenched,” he added.
Again, the regulator may be empowered with relative ease to close in on distressed banks, albeit under a stricter and revised banking law regime, and in particular those permitting compulsory mop ups, but there have been precedents of take-over hitches, as in the case with Zimbabwe Building Society (ZBS).
Suffice to say that the central bank made a huge oversight when it bailed out the once-doomed ZBS some years ago. It is such lapses – over ownership – that have made former owners, including Environment and Tourism minister Francis Nhema muscle in on the revitalised bank.
The same scenario can be said of equally troubled First National Building Society, whose under-probe directors Nicholas Musona and Samson Ruturi are seeking to exploit.
Analysts noted that some failed institutions would certainly come to claim a key stake in the group as they might not let government impose itself on their enterprises.
“The other issue which also has to be addressed is who will head that group. But since government will have a controlling stake for 24 months, they would be keen to have their own person at the helm,” one analyst said.
Gono said the merged entity, built on the guidelines of the Amalgamated Banks of South Africa and with central government owning it until 2007, will operate as a special RBZ business unit.
He said the group, created to solve solvency and liquidity issues currently gripping Zimbabwe’s banking industry as well as preserving indigenisation, can take further applications by the end of December.
“As monetary authorities, we wish to sternly point out to the financial sector that no traits of financial mismanagement, and disregard for regulatory requirements will ever be tolerated again,” he told the Harare gathering.
“Defaulters will, without fail, meet with firm corrective measures, as we are not going to reward errant behaviour and mismanagement through lax intervention policies.
“It is too expected that between now and then, these institutions not yet under curatorship, but who have registered merger or other plans to strengthen themselves, would have done so and fulfilled those ambitions before then.”
Under the ZABG group, there will be asset management, corporate, international banking, lease finance, mortgage and retail operations as well as a junior soft lender.