OVER 990 transactions by commercial banks and building societies valued at $34 trillion were dishonoured by the Reserve Bank last week as the liqui
dity crunch at financial institutions deepened after they illegally routed depositors’ funds into the stock exchange and money market.
Confidential documents in the possession of the Zimbabwe Independent revealed that as at January 23 the central bank refused to honour 999 transactions valued at $33,9 trillion from 18 commercial banks and building societies due to lack of funding by the financial institutions.
The transactions were done through the wire transfer scheme, Real Time Gross Settlement (RTGS).
The liquidity crisis prompted banks to write to the RBZ seeking expensive unsecured accommodation to meet depositors’ demands.
An average of 22% of depositors’ money was invested in shares, money market investments and other securities by almost every bank and building society in the country.
Most of the dishonoured payments were from Standard Chartered Bank which had 374 transactions valued at $14,6 trillion, followed by ZB Bank with $5,8 trillion for 149 arrangements, and Beverley with $4 trillion for 80 dealings.
Kingdom had five dishonoured transactions valued at about $1,7 trillion, followed by ZABG with $1,5 trillion for 42 dealings and Intermarket Building Society with $1,5 trillion for 18 arrangements.
FBC had its 11 transactions valued at $,1,2 trillion referred to drawer, Barclays Bank had three dealings worth $947 billion dishonoured while CBZ had six transactions valued at $698 billion rejected.
The RBZ also refused to honour Tetrad’s 92 transactions valued at $614 billion, Premier Bank’s 184 dealings worth $566 billion and ABC’s five transactions valued at $405 billion.
The central bank further declined to honour Genesis’ six transactions valued at $167 billion, Renaissance Bank’s four dealings valued at $123 billion, Metro’s five arrangements worth $105 billion, CFX’s seven transactions worth $68 billion, NDH’s six dealings valued at $50 billion and Interfin’s two transactions worth $31 billion.
“With such huge dishonoured payments, there is likely to be a public outcry emanating from clients whose payment instructions are not being executed by banks,” reads one of the confidential documents on the state of the financial sector in the country.
The document revealed that the RBZ would not allow this to continue as it may dampen the confidence in the RTGS system, pushing more people back to the use of cash.
“The series of the letters that are being sent to the Reserve Bank clearly shows how banks, large and small, are admitting to misallocation of depositors’ funds, leading to inability to payout withdrawal requests,” the document read. “It is clearly explanatory in some of the letters in the governor (Gideon Gono)’s possession that some banks are admitting to having stashed money in shares.”
Also apparent in the document was confession by the banks that they do not even have security against which to borrow from the central bank, hence their pleas for unsecured borrowing.
“The critical value of this exposition is that it underscores monetary authorities’ point that some banks have been and are engaging in unethical and imprudent behaviour, in the process imposing intolerable frustrations to depositors who would have worked so hard for their money,” the document added.
In response, the RBZ with effect from January 25 tightened its accommodation policy in a bid to force banks to shun “selfish and self-serving tactics that needlessly tie up depositors’ funds in dark corridors” not easily reachable when people want their money.
The central bank came up with a stratified accommodation policy that dictates that all secured borrowings by banks of up to $1 trillion shall be at the prevailing unchanged overnight rate of 975%.
Any excess secured borrowing over and above $1 trillion would be at the escalated deterrent accommodation rate of 1 200% overnight, up from 975%.
All unsecured borrowing would attract a penal rate of 1 500% overnight, a rate which came into effect on January 23, up from 975%.
“On all loans provided under the Reserve Bank’s accommodation window, interest on all prior accommodation must be paid in full before any consideration for a new loan or roll-over is done,” the document read.
Last week, the Independent revealed that some banks, among them Kingdom and ZABG, were facing serious liquidity problems and owed the central bank trillions of dollars in non-payment of statutory reserves and interest.
ZABG became one of the first banks to write to Gono last week requesting $2,5 trillion for unsecured accommodation.
The bank revealed to the RBZ that it had underwritten two initial public officers by under performing property firms — Pearl Properties and Zimre Properties.
ZABG has over 8,5 million shares in Pearl Properties and 5,2 million shares in Zimre Properties.
The bank said it would repay the RBZ through the sale of its shares in the two real estate companies.