THE Reserve Bank of Zimbabwe (RBZ) last week toughened its statutory reserve reporting structure to daily briefings, from the weekly tradition, as the financial regulator moves to stalk f
iscal mishaps in their infancy, businessdigest has learnt.
Citing perfunctory application of government-instigated orders on accountability and enforcement of best banking practice, central bank deputy chief Edward Mashiringwani wrote in a November 1 circular that his employer had noted the resurgence of “creative accounting” in the already frail banking sector, characterised by continual failures since January.
Some unnamed banking culprits were using such a norm to evade payment of statutory funds, he quoted from Bank governor Gideon Gono’s third quarter monetary policy statement.
“One such dimension we have uncovered is the calculated temporary sweeping of current account balances into savings accounts, some of which are even imaginary, for purposes of lowering declared statutory reserves obligations, on the eve of due dates, only to reverse the entries post declaration,” read Mashiringwani’s letter.
Further: “As a contribution to supporting savers, banks should ensure that customer investments are netted off total deposits for purposes of computing statutory reserves,” he added, noting the growth in national savings ought to be strengthened by diligent measures such as netting off total deposits for creation of solvency funds.
In lieu of that, Mashiringwani ordered all “surviving” banking institutions to now observe daily reconciliations, as part of robust actions to stem contagious rot in the once-thriving sector and secure future investment.
“With effect from 1 November, 2004, all banking institutions are required to comply with minimum statutory reserves requirements on a daily basis, with weekly returns documenting daily assessments of compliance being sent to the Reserve Bank for verification,” the operational guidelines said.
Past experiences show that statutory reserve settlements were carried every seven days and especially on Fridays.
Banks are to meet the tough reserve thresholds by ascertaining daily that actual balance on public liability is captured, while net adjustments to individual bank solvency accounts – with the central bank – are communicated to the authorities by no later than 10am of the following day.
Upon verification, the central bank will pass the relevant data or entries to reflect the appropriate status of banks’ solvency every day.
Mashiringwani said the RBZ hoped to “confirm daily compliance” and achieve consistency in monitoring the 30-odd financial institutions.
Meanwhile, the circular also sought to en-force a num-ber of operational issues that include discourage-ment of list-ing bank in-vestments – known as own book -against off-setting frameworks, which practice was yet to be addressed.
The deputy RBZ chief said for compliance purposes, customer investments should only be regarded as those meeting the seven-day tenor and supported by requisite incontestable documentation. Such mandates come in the form of relevant deal slips and confirmations of deposits.
“An investment where at least 90% of the underlying effective yield is accruing exclusively for the account of the customer, and not to the handling banking institutions, over the tenor of investment,” Mashiringwani said.
He stated that investments should only be attested in the sense or essence of customers utilising credit balance, implying that the bank debits a client’s deposit and hence reduces total liabilities or fresh injection of funding for the investment.
Mashiringwani strongly admonished banks which were “counting investments funded from overdrafts” as investor funds for statutory reserve computations, saying such offenders faced punitive sanctions.
“Also, the practice of offsetting overdrawn accounts against liabilities to the public is totally illegal and should be avoided at all times,” he said.