ZIMBABWE’S biggest banks are demanding the central bank re-price all long-dated paper to avert imminent bankruptcies because of costly treasury bill (TB) portfolios, businessdigest established this week.
The five major banks, which co
ntrol close to 90% of all deposits in the financial services sector, want Reserve Bank of Zimbabwe governor Gideon Gono to re-price all long-dated paper priced below 200% to at least 400% per annum.
Documents shown to businessdigest indicate that the bankers are also demanding that TB instruments issued in October 2005 in exchange for reduced statutory reserves be liquidated, saying the policy that introduced them had been reversed.
Last week, the Zimbabwe Independent reported that five commercial banks — Standard Chartered Bank, Commercial Bank of Zimbabwe, Barclays Bank, Stanbic Bank, and Zimbabwe Banking Corporation — were holding huge TBs in their portfolios, most of which had yields averaging 300%.
The TB assets were financing borrowings at rates in excess of 850% under the central bank’s overnight accommodation facility, creating huge gaps between their financing costs and the cost of their assets.
This had raised the risk of wiping out the banks’ accumulated capital at a time they were expected to meet higher capital levels in excess of $1 trillion by September 30 this year.
Currently, the commercial banks’ capital requirements are pegged at $100 billion per institution.
The banks, speaking through the Bankers Association of Zimbabwe, said the 90-day TB rate was low at 525% and should be increased to at least 700% in line with the accommodation rate.
This, they said, would eliminate distortions currently prevalent on the market. The central bank, they said, should revert to the old regime when the TB rate was linked to the accommodation rate.
“The statutory reserve ratio should not be higher than what the banks are allowed to retain of clients’ deposit funds as this creates a mismatch in balance sheets,” the bankers said.