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RBZ Investigates Interbank Market

THE Reserve Bank of Zimbabwe (RBZ) has launched an investigation into financial institutions that have been allegedly abusing the interbank foreign exchange market with a view to cancelling their operating licences.

 

The investigation launched two weeks ago is targeting banks and dealers that the central bank suspects of abusing the interbank market through improper
allocation of foreign currency and tinkering with the exchange rate.

The investigation came as it emerged that the central bank already has a list of banks that are involved in the scandal.

There was speculation in the market on Wednesday that the central bank had cancelled the interbank rate.

Senior bank officials who spoke to businessdigest said they received “informal” correspondence indicating that there were plans to suspend the interbank system.

“We received information (Wednesday) to the effect that authorities were not pleased with the exchange control system,” said an edgy bank official.

“The correspondence encouraged banks to be ethical.”

It was not clear whether this was an official document from the central bank but RBZ governor, Gideon Gono, last night denied having ordered banks to stop trading foreign currency on the interbank market.

The central bank’s surveillance teams could start calling some bank managers to answer questions next week, said a source close to the investigations.

The RBZ is understood to be concerned with the rate movement over the past three weeks. The bank believes that some banks and foreign currency dealers are fiddling with the exchange rate.

The central bank is investigating allegations in the market that some managers within the banking community are buying foreign currency in their individual capacities but using their bank’s structures.

“There are reports that some managers are actually competing with their banks to buy foreign currency from their banking halls,” said an official from the surveillance department of the central bank.

The RBZ is also investigating allegations that some bank officials are still using conduit savings accounts to buy foreign currency from individuals who come to the banking halls.

“We still have officials in banks that are beating the official cash limit to fund their purchase of foreign currency on the parallel market,” said the source.

The investigation will include an audit of the all the accounts in banks and the list of companies that have benefited from foreign currency on the interbank market.

The investigators believe that some banks have not been allocating foreign currency to the priority list set by the central bank when the interbank market was introduced two months ago.

In a statement released last night Gono said: “As monetary authorities, we wish to set the record straight and underscore that the Reserve Bank has not reversed the willing-buyer, willing-seller arrangement nor is it contemplating to do so.”

Gono indicated that the central bank was likely to crack the whip on banks suspected of breaching exchange control statutes.

“Authorised dealers are, however, forewarned that dealing outside the laid out Exchange Control Regulations will result in severe corrective measures being instituted, including the cancellation of the concerned institution’s trading licence,” Gono said.

“Noted cases of abuse of the system by some authorised dealers are being addressed on individual institution basis, informed by the on-going surveillance audits the central bank is carrying out.”

Wednesday’s speculation that the interbank market had been stopped saw the Zimbabwean dollar momentarily stabilise yesterday due to the uncertainty that prevailed in the market.

On Wednesday the dollar closed at about $6,9 billion. The Zimbabwean dollar has been losing value at a rate of about 25% every week.

The idea to revert to a fixed local currency is reportedly being pushed by Zanu PF officials who are blaming the sharp increase in food prices on the movement of the exchange rate on the interbank rate.

President Robert Mugabe has accused businesses of profiteering. Last month some cabinet ministers met to discuss the impact of the interbank rate on the prices of basic commodities.

That meeting concluded that the interbank market was the main reason why prices were galloping. There is also frustration in government circles that the interbank market has failed to achieve the currency stabilisation that was anticipated.

University of Zimbabwe business professor Tony Hawkins said ballooning money supply growth was weakening the local currency.

“You can’t have an effective foreign exchange system or stabilise the currency when you are printing local currency at breakneck speed,” Hawkins said.

“The inter-bank rates are becoming more of a reflection of the parallel market rates and this could force the central bank to revert to fixing the dollar or introduce a managed auction system. It’s a case of more Zimbabwe dollars chasing little foreign currency,” he said.

By Bernard Mpofu

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