HomeBusiness DigestWorst over for Zim banks'

Worst over for Zim banks’

ZIMBABWE’S banking sector could be over the worst after a crisis which claimed eight institutions last year, but it will take time to regain investor confidence, top banking executives have said.

“Verdana, Arial, Helvetica, sans-serif”>After weathering six years of economic recession, Zimbabwe’s banks were plagued last year by a deepening cash crunch, a central bank crackdown on speculative activities and managerial misdeeds.

Some top executives have been hauled before the courts on charges of defrauding investors, while others have fled the country to avoid arrest.

But the bankers say the economy is set to expand this year — albeit modestly — as measures taken by the central bank to stamp out illegal currency trading, improve capital ratios and beef up corporate governance are starting to bear fruit.

Richard Wilde, chairman of the Commercial Bank of Zimbabwe, is relatively optimistic.

“The banking sector is in a period of consolidation at the moment and I believe that the worst is behind us,” he said. “When you get to a situation when people cannot access their funds and you have banks closing regularly, confidence is bound to be low. But once the situation stabilises I am confident that it will return,” he said.

Zimbabwe’s largest local bank, the Commercial Bank of Zimbabwe, is 25%-owned by South Africa’s Absa and 75% by the government.

Joseph Muzulu, director of retail banking at the Zimbabwe Banking Corporation, blamed the woes of the sector on lax corporate management, which he said, had now been addressed.

“Generally, the banking sector has been sound but the problems were mainly management-specific, lack of alternative investments and absence of supervision. Now that the bad apples have been removed, the sector can now move forward,” he said.

The collapsed banks, which are all locally-owned institutions, emerged in the 1990’s following the liberalisation of the sector by the government. They have since been placed under the control of independent regulators.

The Reserve Bank merged three — Royal Bank, Barbican Bank and Trust Bank — into a single group where investors and depositors will be allowed to convert their funds into shares. It raised minimum requirements to $10 billion from $500 million and demanded that the banks release results quarterly to avoid creative accounting.

The central bank also introduced new corporate governance rules that banned shareholders from holding executive posts in banks and limited individual stakes to a maximum of 10%.

All executive appointments now have to be vetted by the central bank before approval. The banking crisis stemmed from wider economic woes which saw Zimbabwe’s economy shrink by 30% since 1999, pushing inflation up into triple digits and the jobless rate to more than 70%.

President Mugabe denies accusations that he has turned a once model economy into a basket case and says it has fallen victim to sabotage by developed countries unhappy with his drive to seize white-owned farms to resettle blacks. — Reuter.

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