THE Bankers Association of Zimbabwe (Baz) has proposed setting aside the suspension of Real Time Gross Settlement (RTGS) system and Internal Transfers so that genuine transactions are not punished for the illegitimate activities of others.
To ensure this, the association has proposed strictly enforcing a limited number and value of transfers per customer daily.
According to minutes of a meeting by Baz held on Tuesday in response to the suspension of RTGS, Baz said in the event that the proposal cannot be effected in the short term, at least clearing and non-clearing banks should be allowed to use the RTGS between themselves for their own transactions only. This will improve liquidity and fluidity.
â€œIn the event that none of the above can be considered, then RTGS, the Central Security Depository (CSD) and Straight Through Processing (STP) systems may need to be completely discontinued to curb licensing and maintenance costs which are denominated in foreign currency,â€ said the Baz minutes.
Reserve Bank governor Gideon Gono last Friday suspended the use of RTGS as a form of payment saying it was being abused.
â€œThe victims have largely remained the defenceless members of the public who are having to watch in despair as their hard earned incomes are grabbed away from them through the extractive pricing structure,â€ said Gono.
Baz expressed concerns over the Reserve Bankâ€™s suspension of the RTGS systems saying reversion back to the cheque system builds rigidities in the smooth operation of the money market that had been overcome by the RTGS system.
BAZ said it noted the Reserve Bank directive to suspend with immediate effect all RTGS and internal transfers and appreciates the reasons why the action was necessary. The association pledged to support the authorities in the struggle to eliminate the use of the banking platform for speculative and illegal transactions.
â€œHaving noted the intended objectives, we wish to share with the authorities some of the unintended consequences or challenges the new strategies will pose to the financial system,â€ the minutes said.
In the hyper-inflationary environment, Baz said the cheque clearing period would grossly cost the ordinary man in the street as they cannot access their funds immediately upon receipt.
â€œLegitimate transactions are going to suffer. A reversion back to the cheque system builds rigidities in the smooth operation of the money market that had been overcome by the RTGS system,â€ said Baz.
Baz said the RTGS system had allowed immediate value in the payment system and institutions such as the Zimbabwe Stock Exchange would have to revert to T plus-7 from T plus-3.
â€œContractual maturity payments for investments by institutions will attract a premium over the 4 day clearing period,â€ read the minutes.
Baz said the intended objective of curbing parallel market activities may not actually be fully achieved as it is likely that participants in this market may switch to cheques and simply factor in T plus 4 and perceived inherent settlement risk in their pricing structures. â€œThis will result in:further worsening of the parallel exchange rates increase in cost build up resulting in a sharp increase in prices of goods and services across the board,â€ the document said.
BAZ said financial institutions had invested heavily in the RTGS, CSD and STP systems through licence fees and hardware.
â€œSuspension of the RTGS system will lead to capacity underutilisation which will be unsustainable particularly for non clearing banks,â€ said Baz.
Baz said the operation of the CSD platform and cheque system is not compatible. Two clearing periods daily would be required including Saturday clearing.
â€œThe Reserve Bank would need to open the Repo window to facilitate the rapid funding of market short positions to avoid bottle necks,â€ said Baz.
Operations for non-clearing banking institutions will be critically curtailed such as Statutory Reserve payments. â€œIncreased settlement risk, and monthly collateral commitments will be too great to be supported by a single institution. Non clearing banks will have to rely on clearing banks for their operations which may bring rigidities and inefficiencies to the disadvantage of clients.Â There willÂ be need for an operating account with the Reserve Bank of Zimbabwe to enable them to operate successfully,â€ said Baz.
By Paul NyakazeyaÂ