The story that led to Trust’s collapse



THE closure of Trust Bank in 2003 and its subsequent placement under the management of a curator has sparked a great deal of controversy as the banking crisis refuses to go away.


Below is a chronology of events regarding Trust Bank’s story:


* In the last quarter of 2003, Trust Bank faces a liquidity crunch in the normal course of trading, worsened by a $7 billion fraud.


* Trust approaches the Resrve Bank of Zimbabwe for liquidity support. Request turned down.


* Rumour spreads the bank faces liquidity problems due to engaging in non-core business such as investing in bricks and motor vehicles using depositors’ funds. A run on deposits occurs, further worsening the liquidity crisis.


* RBZ institutes investigations into these allegations and calls in NECI, CID, Zimra and Camelsa Auditors.


* Investigators produce a report exonerating the bank but the report is never made public.


* January 9 2004, the RBZ gives conditional support to Trust Bank demanding that three directors resign.


* Support given as follows: $268 billion loan ($60 billion being a credit to statutory reserves).


* RBZ appears to charge 300% per annum interest compounded daily.

l Support given without any agreement signed. Terms and conditions remain undisclosed.


* Trust Bank pays back $83 billion by end of March 2004, leaving a capital balance of $125 billion. It also provides a repayment plan that shows it can repay the entire debt by end of September 2004 provided the interest is legal or is frozen at the end of March 2004.


* Nedbank attempts to buy the bank and merge it with MBCA but frightened off by the interest burden. The RBZ refuses to confirm the loan.


* Debt grows to $1,4 trillion by July 2004. This is later announced in a monetary policy statement by the governor. Neither the RBZ nor the curator makes any calculations or formal communication to the shareholders.


* Between March and December 2004 Trust Bank makes several formal requests to the RBZ to stop further interest accruals in view of breached in duplum rule. No response obtained from the RBZ.


* Meanwhile, in June the RBZ refuses to pay back the US$30 million owed to Trust Bank through an offshore loan Trust accessed from Afreximbank.

This is despite the fact that the RBZ had borrowed the money which was meant to support export agriculture and to relieve Zesa and Noczim, among others. Repayment finally made after Afreximbank informs the president of the default on an official visit.


* In February 2004, a four-member external turnaround taskforce is appointed by Trust Bank to assist in the formulation of strategies. The members are Peter Bailey, David Long, Dominic Magwada and Glenn Conrad. Peter Bailey later becomes the curator irrespective of the obvious conflict of interest. Dominic Magwada accepts appointment to become MD of Trust on March 15 2004. He later abandons ship and accepts appointment to the ZABG fully aware that he was the most senior executive charged with protecting the interests of shareholders. He resigns from the ZABG in a huff after a boardroom coup, ironically, on March 15 2005.


* In January 2004 RBZ seconds a technical team headed by Stephen Gwasira (now ZABG CEO) to assist turn Trust Bank around.


* No meaningful contribution made by either the external taskforce or the RBZ technical team to improve the fortunes of the bank.


* Trust Bank placed under curatorship on September 23 2004 for a period of six months. Peter Bailey appointed curator.


* On October 28 2004, the RBZ announces that three banks under curatorship will be amalgamated to form the ZABG. (Trust Bank had been in curatorship for only one month.)


* On January 19, the curator advises Trust Holdings Board that the ZABG will buy the Trust assets. The sale done in terms of the new law rushed through parliament before the Christmas break and signed by President Mugabe on January 14 2005.


* On the following day, three curators of Barbican, Trust and Royal conclude an agreement of sale wherein the curators sell all the assets of the three banks to ZABG. – Own Correspondent.

Top