NMB in liquidity crunch

Shakeman Mugari

ONE of Zimbabwe’s strongest banks, NMB Bank Ltd, was yesterday feared to be lurching into a serious liquidity crisis amid reports that several financial institutions are in dire straits.
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Market sources said NMB was trying to secure liquidity support from the Reserve Bank of Zimbabwe (RBZ) to avert collapse. The bank, whose founding directors fled to London earlier this year to avoid arrest, has been struggling to get stop-gap finance from the RBZ’s Troubled Banks Fund.

Sources said NMB was scrounging for $160 billion.


There is also trouble at discount house NDH, which was struggling to pay maturities and has not been writing new business.


Insiders said NDH was also facing a serious liquidity crunch. The sources said NDH was surviving on overnight accommodation from the central bank. Although NDH managing director Ernest Matienga was not available for comment, an official confirmed the financial institution was facing a liquidity crisis.


“Like any other financial institution, we are facing liquidity problems,” said the company official.


The Zimbabwe Independent last night heard that NDH yesterday held a meeting at Royal Harare Golf Club with creditors over sums ranging between $50 million and $500 million to explain the company’s liquidity crisis. Sources privy to the meeting said NDH wanted to calm the edgy creditors. The discount house also announced it was restructuring for a possible take-over by First Bank.


Despite meeting the RBZ’s capital adequacy deadline, many financial institutions are still facing serious liquidity problems.


Analysts say the Reserve Bank contributed to the liquidity crisis through its treasury bills. The analysts said in June the central bank forced banks to buy its treasury bills and promised to give them overnight lending.

The purchase of the bills wiped out banks’ reserves.


By Tuesday this week, the market was in a serious deficit of about $300 billion and this has seen most banks scurrying for cover. Almost all banks are under stress and are using the overnight lending facility to stay afloat.

Financial sector insiders say a number of banks this week rushed to the central bank to seek accommodation and funds from the liquidity support scheme.


David Hatendi, the NMB chief executive, yesterday said the bank was talking with the RBZ.


Panic withdrawals at NMB have been worsened by the booting out of its chairperson, Paddy Zhanda, last week.


Last week alone the bank had more than three meetings with Reserve Bank authorities seeking accommodation and liquidity support. Hatendi said: “The market has been in a short position and like any other bank we have been affected,” Hatendi said.


“In anticipation of this eventuality we did alert the central bank and the talks have resulted in an understanding,” he said without giving details of the ‘understanding’.