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Creditors press in on Century Bank

Dumisani Muleya

BARELY a week after the closure of five financial institutions facing a liquidity crunch another bank is under pressure from creditors.

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Banking sources said Century Bank might be hit by the contagion from collapsed ENG Capital Asset Management which has already claimed Century Discount House (CDH).

The discount house closed shop recently after it was allegedly defrauded of $22 billion by ENG. A liquidation process is under way to pay creditors.

Ian Raphael Costa of Costa & Madzonga is representing CDH liquidator Cecil Madondo of Tudor House Consultants.

Although the CDH closure did not immediately affect Century Bank, sources warned the bank could be at risk from a 30% exposure to ENG.

ENG bought 350 million shares of $15 each in Century Bank for $5,3 billion last year. The deal was brokered by New Africa Securities.

The bank’s situation is compounded by threats from creditors to make claims against Century Holdings, which owns Century Bank, if the CDH/ENG liquidation does not yield enough to meet their demands.

CDH was bought by ENG under unclear circumstances last year but had not been legally transferred to the collapsed asset management firm at the time of its closure in January.

Although Century Holdings has made it clear to creditors that their claims lie with CDH/ENG, some creditors have nevertheless threatened to file claims against Century Holdings if ENG and CDH fail to meet their financial obligations.

The creditors’ threats emerged after a March 17 meeting between CDH liquidators and creditors. This has left Century Holdings exposed to what could turn out to be substantial claims.

Efforts to get comment from Century Holdings were unsuccessful yesterday.

ENG, whose directors have been in jail since December last year over fraud and theft involving more than $60 billion, reportedly owes creditors more than $100 billion.

Century Bank is one of the struggling institutions recently rescued from collapse by the Zimbabwe Reserve Bank’s Troubled Banks Fund. It received $30 billion in liquidity support. Other banks that have benefited are Trust Bank ($80 billion), Metropolitan ($23 billion), and Barbican ($6 billion).

Barbican Bank and its asset management company were shut down last week due to a liquidity crunch.

Three subsidiaries of Intermarket Holdings – a bank, a building society and a discount house – met a similar fate. However, Intermarket – a sprawling locally-owned conglomerate – has maintained other subsidiaries despite its collapsing empire.

Since the government began enforcing a strict monetary policy and cracking down on corruption, the financial services sector, which has thrived on speculation in the money and property markets, has been in deep trouble.

The sector’s predicament has been worsened by high new capital adequacy requirements introduced by the government.

Commercial banks now need $10 billion in capital compared to $500 million last year. Merchant banks and finance houses require $7,5 billion, up from $300 million.

Building societies now need $7,5 billion compared to $300 million, while discount houses require $5 billion, an increase from $200 million. As a result some banks face the prospect of either closing down or merging.

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