HomeBusiness DigestGovt to dilute Gono'spowers over banks

Govt to dilute Gono’spowers over banks

Godfrey Marawanyika

GOVERNMENT plans to reduce Reserve Bank of Zimbabwe governor Gideon Gono’s discretionary powers to cancel banking licences.

sans-serif”>The central bank has the power to place a bank under the management of a curator without consulting government. Now the Ministry of Finance wants to be consulted first, it has been learnt.

Government is amending the Banking Act so that it is consulted before a banking institution can be shut down.

Government also wants to be informed if there are going to be significant changes in the shareholding structure of any bank.

Official sources said the Banking Act would be amended to allow for wider consultation before drastic action is taken to either close down or place a financial institution under a curator, with devastating consequences for the banking public. Last year thousands of people were affected when 10 financial institutions were placed under the management of curators while others were forced into liquidation at short notice.

The sources said the financial sector blitz last year hit a number of senior politicians who had either invested in the affected banks through proxies or had their accounts affected.

“Before cancelling a banking institution’s registration in terms of subsection (1), the Registrar (of banks) shall (a) through the governor, consult the minister and (b) after the consultation notify in writing the banking institution concerned that he proposes to cancel the institution’s registration and of his reasons to do so,” the government said in a notice.

“Before approving the acquisition of a significant interest in a banking institution, the registrar shall, through the governor, consult the minister and shall provide the minister with such information regarding the proposed acquisition as the minister may reasonably require.”

Financial institutions that were placed under the management of curators were Barbican Bank, Rapid Discount House, CFX Bank, CFX Merchant Bank, Royal Bank, Time Bank, Trust Bank and Century Discount House.

Also placed under the compulsory six-month closure was Intermarket Banking Corporation and Intermarket Discount House.

In January, the central bank merged Trust Bank and Royal Bank to form the Zimbabwe Allied Banking Group.

The banks placed under curators were deemed to be in poor financial positions and were also accused of diverting from their core banking business.

According to the RBZ’s January report on the status of capital deficiency at troubled banking institutions, Intermarket Banking Corporation needs a minimum of $18,15 billion to restore normal operations, while the discount division requires $172,53 billion.

Barbican requires $37,87 billion to restore normal operations.

Rapid was placed under liquidation in December.

The report said CFX Bank requires $132,9 billion to restore normal operations, while the merchant banking division requires $74,83 billion.

The central bank said Royal Bank would need “at least $226,75 billion in order to comply with minimum capital requirements”.

Time Bank needs $269,5 billion capital injection from shareholders.

The report said Trust Bank requires a minimum of $1,47 trillion to restore normal operations.

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