THE Zimbabwe Allied Banking Group (ZABG) will not be opening to the public this month as planned, because there are crucial outstanding legal and administrative issues wh
ich have not yet been completed.
In his third monetary policy review in October last year, Reserve Bank governor Gideon Gono said the bank would open beginning January this year.
He also promised that small depositers with their money locked up in closed banks would be paid before the school term begins.
The ZABG was expected to open this month. Creditors and depositors whose investments are locked up in closed banks to be amalgamated under ZABG will have to wait a little longer to access their funds, it emerged this week.
The Troubled Financial Institutions Resolution Bill, which seeks to regulate the operations of ZABG, has not yet been signed into law by President Robert Mugabe.
This means that the legal framework for its formation has not been completed making it impossible to open its doors to the stranded depositors. Even when the Troubled Financial Institutions Resolution Bill becomes law there are still some outstanding legal issues to be followed — a process that might delay ZABG’s start further than envisaged by the central bank.
This makes it impossible for ZABG to start operations this month as initially planned. Legal experts say it might take weeks or months before the bank could start.
At time of going to press the Bill has not yet been signed by Mugabe, but its signing does not guarantee immediate permission for the government and the central bank to open ZABG.
The Troubled Financial Institutions Resolution Bill, rushed through parliament before the festive season, makes provisions for former directors and shareholders to challenge the takeover of their banks by government.
Section 6 of the Bill requires that the individual banks be declared “troubled” and this is supposed to be verified by the courts. The Reserve Bank is then required to make an application to the High Court to confirm the status of the bank.
The law requires that shareholders, creditors, and depositors be notified and they are given 10 working days to respond or challenge the central bank application. The law also demands that the central bank notifies former directors who may choose to challenge the takeover. A High Court judge would hear the challenges by the creditors, depositors, shareholders and former directors before making a ruling on the confirmation.
Sternford Moyo, a senior partner with Scanlen & Holdness said the process might take longer to complete. There are only 10 working days left this month.
“If the stakeholders choose to challenge the RBZ application to declare the bank as ‘troubled’ then the process might take even longer,” Moyo said.
“And remember a judge is under no obligation to make a ruling on the same day and this makes the legal process for the formation of ZABG longer,” said Moyo.
“With those outstanding issues it is difficult to see how it could open this month. The amalgamation of the banks themselves is a process.”
He said if the shareholders, depositors, former directors and creditors decide to challenge the takeover it might take more time for ZABG to come on board. Legal process in Zimbabwe takes years to resolve.
Experts say that the legal battle between bank owners and the government
might spill over into the Supreme Court. There are chances that bank owners might challenge the constitutionality of the Troubled Financial Institution Resolution Bill.
This might stall the ZABG project. The Supreme Court has been accused of being slow in delivering judgements on cases that deal with important constitutional issues.
There are also concerns in the market that the ZABG is shrouded in secrecy, which indicates that the central bank might have something to hide.
Jacob Mafume, a legal expert with Zimbabwe Lawyers for Human Rights (ZLHR), said the silence by the monetary authority added to the uncertainty and instability in the banking sector.
“The process is shrouded in secrecy as if it’s an issue between the government and the central bank only. Anyone owed money by a company is free to apply for liquidation, they cannot take over just like that. The courts are there for the creditors to seek redress.”
He said there was no transparency in the way the bank is being formed.
“In fact no one knows how it would operate, yet the shareholders and the depositors have a right to be informed about the fate of their assets and money,” said Mafume.