Forced mergers for local banks

FINANCIAL institutions that fail to meet the new capital requirements by September 30 will be forced to merge, it became clear this week.


Commercial banks have to

raise $10 billion, building societies and finance houses $7,5 billion, while discount houses have to raise $5 billion.

Industry sources told businessdigest that the option available for banks that fail to meet the requirements was to merge.

Sources say withdrawing banking licences would cause panic in the financial sector.

“There is no way that the RBZ can withdraw the licences considering the ripple effects that would follow. The only option available is for the banks to merge,” a source said.

Sources said mergers would reduce the number of financial institutions available in line with recommendations made by the International Monetary Fund (IMF) in its Annual Article IV Consultation.

Led by Dana Ross, the delegation was in Zimbabwe in March and said the country could not sustain the numerous banks in the country. The delegation said Zimbabwe needs only seven banks.

Zimbabwe has 17 commercial banks, six merchant banks, eight finance houses, five building societies and eight discount houses.

Industry sources pointed to last week’s revelation by businessdigest that the RBZ had come up with a policy for banks – Troubled Bank Resolution Strategy – to clean up the mess in the financial sector.

The scheme is scheduled to be launched at the end of the month.

It will also result in the central bank trying to consolidate and correct the problems that occurred during the indigenisation financial sector boom.

Sources told businessdigest last week that the new policy was necessitated by the would-be marriage involving Kingdom Bank, ReNaissance Merchant Bank and African Banking Corporation (ABC) to form a locally consolidated financial institution.

The Troubled Bank Resolution Strategy is also based on the strategy of Amalgamated Banks of South Africa (Absa).

Absa was formed when Allied, United and Volkskas banks merged in 1991 and was joined by Bankorp – including Trust Bank and Bankfin – in 1992 to form Amalgamated Banks of South Africa (Absa).

Although the three institutions are merging, it does not effectively mean that they are not in a sound financial position, but by grouping the firms will form one solid indigenous finance house. – Staff Writers.

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