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State to take over failed banks


Shakeman Mugari

THE government will take over all closed banks and those that fail to repay loans advanced under the Troubled Bank Fund by the Reserve Bank of Zimbabwe (RBZ).

ace=”Verdana, Arial, Helvetica, sans-serif”>The RBZ will convert debt owed by the troubled banks into equity through a Special Purpose Vehicle called Allied Financial Services with effect from January 1 next year.

Governor Gideon Gono announced in his third quarter monetary policy statement that the banks would be amalgamated into one group.

The new entity to be known as the Zimbabwe Allied Banking Group (ZABG) would include all failed banks hit by the liquidity crunch this year.

“Initially ZABG will be financed through the conversion of RBZ Troubled Bank Fund and claims of other significant creditors and depositors converted into equity,” Gono said.

The government will then bear the cost of banking crisis resolution funds already advanced to the financial sector through the Troubled Bank Fund.

ZABG is likely to include seven banks that are currently under curatorship and two that are currently in liquidation. Troubled Trust Bank, Barbican, Intermarket Banking Corporation and discount house, and Time Bank are likely to be absorbed into the group. Royal Bank is also lined up for government takeover.

The group will also include other private companies that have failed to repay their loans advanced to them through the Productive Sector Facility.

The failed banks would be taken over by converting government debt into equity. “The Reserve Bank has, through the Troubled Bank Fund, used public funds to resolve solvency and liquidity deficiencies in the privately owned banking institutions, which will be converted into equity,” Gono said.

“An SPV, designated Allied Financial Services, will be used to hold shares that the government will acquire in troubled banking institution.”

“Government will acquire the shares through conversion to equity of liquidity support loans granted to troubled banking institutions by the Reserve Bank under the Troubled Bank Fund or temporary liquidity assistance, as well as outstanding loans in respect of the Statutory Reserve and Productive Sector Facility,” said Gono.