Govt interference in RBZ retrogressive: IMF

Godfrey Marawanyika

THE International Monetary Fund (IMF) has raised concern over government’s involvement in the cancellation of banking licences, saying this is retrogressive.



T face=”Verdana, Arial, Helvetica, sans-serif”>In June, the government amended the Banking Act to make it mandatory for the central bank to inform it before closing down any financial institution.


The amendment was meant to clip governor Gideon Gono’s wings. Gono had prior to the amendment exercised free reign in closing down banks.


The latest IMF report released last week, however, says the amendment will undermine effective supervision of the banking sector.


“Staff stressed that the provision of full powers for banking supervision to the RBZ was instrumental in ensuring timely intervention in problem banks,” the IMF said.


“In this context, the revision to the Banking Act requiring the governor to consult with the Minister of Finance in registering banks and intervening in troubled banks is a regressive step.”


The report however noted that Zimbabwe’s banking system was generally sound and adequately supervised.


“Although loan quality has deteriorated significantly, banks’ vulnerability has been reduced by the shift in asset composition towards short-term low risk securities (treasury bills), with loans now accounting for only about 2% of total assets,” the IMF said.


“The few remaining troubled banks are known and regularly monitored and the risk contagion is minimal given their limited trading in the interbank market.”


The IMF said it supported efforts since 2003 to strengthen bank supervision and risk management in the financial sector.


Government argued for intervention saying this was being done to allow for wider consultation before drastic action was taken to either close down a bank or to place it 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 2004 financial sector blitz hit a number of senior politicians who had either invested in the affected banks through proxies or had their accounts affected.


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 or were accused of straying from their core banking business.