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RBZ Starts Bank Capital Verification Exercise

THE Reserve Bank of Zimbabwe has requested each banking institution whose equity capital does not comply with prescribed minimum capital levels to submit a detailed re-capitalisation plan by Monday.

Banking institutions “without realistic potential to maintain adequate capital levels commensurate with their risk profiles on an on-going basis should seriously consider mergers and consolidations,” the RBZ said.

This is part of the Reserve Bank’s capital verification exercise across the sector to determine the capital position of every banking institution.

On Tuesday, Reserve Bank governor Gideon Gono in a circular to all banking institutions said the enforcement of the revised capital requirements would be in phases in accordance with standard banking practices.

Gono said the phased approach takes into account the need for the banking sector to adapt to the new macroeconomic environment to restore confidence in the banking sector.

“Every banking institution whose paid-up equity capital does not comply with the respective prescribed level is required to submit a detailed re-capitalisation plan to the Reserve Bank of Zimbabwe by June 15, 2009 for its consideration and approval, indicating amounts to be raised and timeframes,” Gono said.

He added that the Reserve Bank would “closely monitor the adequacy of banking institutions” capital levels and will conduct on-site examinations in order to enforce on-going compliance with minimum capital requirements.

According to the circular, commercial banks would need to have a minimum requirement of US$6,25 million by September and US$12,5 million by March 31 next year.

Merchant banks and building societies would be required to have at least US$5 million by September and US$10 million by March next year.

Finance and discount houses are required to have a minimum capital adequacy ratio of US$3,75 million each by September and US$7,5 million each by during the same period next year.

Asset management companies’ minimum equity requirements have been pegged at US$1,25 million for September and US$2,5 million for March 2009.

Gono said each bank was required to comply with at least half of the prescribed minimum requirement for its class by September this year, and fully compliant by March 31.

Economist Eric Bloch said there was “serious” need for banks to re-capitalise so as to avoid collapsing.
“Although at present there are little signs of weakness in the banking sector, banks should re-capitalise. Failure to do so, collapsing is inevitable and depositors will again lose out on their savings,” Bloch said.

The IMF team currently in the country has shown interest in the re-capitalisation of local banks.

Nqobile Bhebhe

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