THERE is no respite for Zimbabwe’s struggling banks despite a 10% reduction of the statutory reserves rate yesterday.
ify>In his first quarter monetary policy review Reserve Bank governor Gideon Gono reduced statutory reserves for all financial institutions to ease their liquidity problems.
Gono slashed the statutory reserve requirements by an average 10%. The problem, however, is that the central bank also increased the secured lending rate for banks from 975% to 1200% making it more expensive for financial institutions to borrow from the RBZ under the overnight accommodation facility.
Unsecured accommodation rates were increased for the second time in two weeks to 1 650% up from 1 500% further hitting the banks that might want to borrow from the central bank without security.
Gono reduced the statutory reserves for commercial banks on call and demand deposits from 50% to 40%.
This means that for every dollar that a client deposits with a commercial bank the central bank will take 40 cents for security in the event that the financial institution fails to meet its obligation to the depositor.
Statutory reserve requirements, on time deposits and buybacks were reduced from 45% to 35%. Merchant banks will now pay 40%, down from 50% on call and demand depositors.
Statutory reserve requirements for discount houses have been reduced from 45% to 35%.
Banks have been accused of investing trillions of dollars of depositors’ funds into properties, foreign currency and shares resulting in the liquidity crisis. An average 26% of all banks’ balance sheets are said to have been
put into investments and securities.
This has resulted in almost all banks failing to honour their cash obligations to the depositors. The result has been long queues because of the cash crisis. A number of banks are facing a serious liquidity crisis.
Seven banks have since been put under special monitoring systems by the central bank to establish the root cause of their liquidity problems.
The banks are Kingdom, Metropolitan, Barclays, ZABG, Renaissance, Genesis and POSB.
For their part banks have accused the central bank of demanding a huge portion of the depositors’ funds to hold as statutory reserves.
This, the banks say, has forced them to find other illegal methods to recover the value of the depositors’ funds in order to meet their obligations.
According to the Banking Act it is illegal for a bank to invest in shares unless if it is holding the investment as security for a loan or the shares have been acquired during underwriting.
Analysts say the reduced statutory reserves might offer some relief for banks but they still have to contend with the increased lending rates being charged by the central bank for overnight accommodation.
“It’s a step in the right direction but we will still struggle because the RBZ’s rates are still very high,” said a chief executive with a commercial bank.
“As monetary authorities, we once again wish to reiterate to the banking sector that the Reserve Bank has no appetite for injecting inflationary liquidity into the system through the accommodation window,” Gono said.
“In order to promote discipline in the banking sector’s assets-liabilities management regimes, all interest for previous accommodations have to be paid in full prior to any new borrowings or roll-overs of past loans.”
The central bank also reduced the rate at which it mops up excess liquidity in banks at zero rate.
“In order to consolidate the assets-liabilities management positions in the banking sector, with immediate effect, the tenor on the excess liquidity management, zero coupon bonds has been reduced from 270 days to seven days.”