CALM returned to the banking sector this week after the Reserve Bank of Zimbabwe (RBZ) reversed its earlier directive forcing banks to invest in Economic
Stabilisation Bonds that was threatening to plunge the sector into bankruptcies.
There has been uncertainty in the banking sector for the past two weeks following the RBZ’s order forcing commercial banks to invest 25% of their balance sheet in five-year bonds and 20% in seven-year bonds.
The decision would have seen banks having 45% of their balance sheet locked in long-term papers — five and seven years — making the banking sector unviable.
The move sent shock waves in the financial sector with other banks fearing that they might be forced into insolvency. Most banks had already started feeling the pinch after they invested 20% of their monies in the five year bonds.
Sources however told businessdigest that the central bank relented on Wednesday after strong representations from the banking sector. The central bank told bankers that it was no longer mandatory for banks to commit 20% of their balance sheet in the seven-year bonds.
This means that banks are no longer under obligation to buy the bonds.
“The central bank representatives told us that it was no longer mandatory for us to invest in the seven-year bonds,” said a senior bank executive who attended the meeting on Wednesday.
“They have also removed the 5% that we were supposed to invest in five year bonds in addition to the 20% that we had committed on those bonds.”
The reprieve will also apply to asset managers who had also been instructed to invest 17, 5% in five year bonds and 12,5% in seven year bonds. The decision was verbally communicated to the banks and there was no written statement.
Bankers are however not celebrating as yet as they remain cautious that the reprieve might be changed when RBZ governor Gideon Gono returns from outside the country.
“We are happy that we have got the reprieve but we remain worried because anything might change when Gono returns. So we are not sure whether he will allow the decision to stand,” said one banker.