A NUMBER of banks could fail to renew their operating licences, as the Reserve Bank of Zimbabwe (RBZ) is now demanding $10 billion as part of new capital requirements for a commercial ban
This is an increase from the $500 million demanded by September this year.
In the process, the central bank has also revised all licensing requirements for financial institutions.
The new requirement surpasses the profit margins posted by most commercial banks in 2002, and this development might force a number of financial institutions unable to raise the requirements to merge.
The latest revision of application fees will also result in merchant banks and finance houses paying $7,5 billion for a licence, up from $300 million.
Building societies who previously had their capital requirements determined by the Ministry of Finance and Economic Development through the Registrar of Financial Institutions will now have to part with $7,5 billion.
Discount houses are now required to pay $5 billion, up from $200 million.
A circular to that effect has already been sent to banks about the structures from the RBZ’s Supervision and Surveillance Department.
“We write with reference to the Monetary Policy announced by the governor Dr Gideon Gono on December 18 2003,” Stephen Gwasira head of banking and supervision, wrote on Friday last week.
“In connection, we advise that the new capital requirements are as follows: commercial banks – $10 billion, merchant bank – $7,5 billion, finance house – $7,5 billion, building societies – $7,5 billion, and discount house – $5 billion.
“All banking institutions will be expected to be in compliance with the stipulated requirements by September 30 2004. The relevant statutory amendments will be made in due course.”
On Monday, the RBZ said it was reviewing the operations of local banks which are already reeling from a run on deposits.
Last month during his monetary policy announcement Gono said he would limit the RBZ’s liquidity support to banks as part of efforts to reduce inflation.
He said inflation, currently at 619,5%, would be reduced to single digit levels by the end of his tenure in 2008.
The RBZ said asset management companies are now required to part with $500 million as part of registration fees.
The regulations that asset management companies should be registered so as not to have any financial exposure to the banking sector has so far claimed Century Discount House, a subsidiary of ENG Capital Finance, whose directors were this week hauled before the courts over fraud.
A number of financial institutions have been hit by a spate of panic withdrawals by investors and depositors, as fears mounted during the course of the week that the concerned firms might eventually close.
An analyst this week said a number of institutions might fail to raise the required capital.
“This development might actually result in a number of mergers coming on board from the financial sector as a number of banks might not be able to raise that money,” said one analyst.
“In fact, we know that despite the regulatory requirements that banks publish their results for the public to see, some of the banks have not been doing that for some time now.”