TREMORS in the currently shaky financial services sector, sitting on an asset portfolio of over $4 trillion, intensified this week as a number of locally-owne
d banks continued to precariously trade in a hazardous terrain.
The financial quake has forced retail shops and companies to blacklist a number of banks that are feared to be gripped by severe liquidity problems and could be the next casualties of a sweeping Reserve Bank of Zimbabwe (RBZ) crackdown in the sector.
ENG Capital Asset Management all but collapsed last week after it failed to pay investors over $100 billion. The firm’s directors who are now on remand had allegedly invested investors’ funds in specu-lative and personal properties that included posh cars and mansions.
Century Discount House, appa-rently defrauded of $22 billion by ENG, also sunk in the process. Although the closure of Century Discount House did not affect Century Bank, sources said the bank could be hit by the spreading ENG contagion because the asset management firm had 30% equity in it.
It is understood ENG last year bought 350 million shares at an average price of $15 a share in Century Bank for $5,3 billion. This could expose the bank as credi-tors jostle to seize ENG assets to recover their money. First Mutual Life is exposed to the tune of $30 billion.
Retail shops sent alarm bells ringing this week by rejecting cheques from banks seen as in trouble. Electronic and furniture retail giant, TV Sales & Hire, was rejecting cheques from Trust Bank, Time Bank, Metropolitan Bank, First Bank, Century Bank, and all discount houses.
Leading cellular telephony firm, Econet Wireless, has also blacklisted Trust, Time, Metropolitan, and Century banks. Sources said many other shops and companies have taken similar measures.
It is understood Agribank (now Land Bank) is trembling and an emergency taskforce chaired by Air Vice-Marshal Henry Muchena has been seconded to rescue it. The bank, which has not released financial results for two years despite requirements of the Banking Act, was last year reported to be technically insolvent.
RBZ officials, backed by state intelligence officers, this week descended on banks inspecting their assets, in particular cars, as part of the clampdown on illegal speculative gains. They are next week expected to raid houses of bank directors in search of information, as well as things like hoarded foreign currency.
RBZ governor Gideon Gono warned last month of a crackdown against banks.
“On-site and off-site examina-tions will be intensified, and ad-herence to international best pra-ctice and responsible behaviour required of all financial institutions,” he said. “The curtain has been drawn against the era for the proliferation of weak, poorly managed financial institutions dependent on cheap and unlimited central bank credit.”
Some banks were now despe-rately anxious to protect them-selves from the unfolding banking crisis, which could have far-reaching consequences in the financial system as its ripple effects wave through institutions like insurance companies and pension funds that have invested in stock and money market speculation.
“NMB has closed Interfin’s major account to protect itself from possible contagion,” a source said. “Interfin moved its account to Trust before running away to Stanbic. That shows the level of panic and jittery reactions in the banking sector.”
Several banks are restless because they have been hit by a terrible runas investors and depositors with-draw their money amid growing speculation a number of banks could go under. Trust Bank has already lost 30% of its deposits.
“Some banks are losing at least $300 million a day as the run intensifies,” a source said. “This has left them exposed big time.”