The move to remit funds kept in offshore accounts is meant to address liquidity problems in the financial sector and the economy at large.
“With effect from March 1, 2012, banks will, therefore, be required to maintain in their Nostro Accounts a maximum of 25% of their balances off-shore,” said Biti.
“The maximum rises to 30% from June 1, 2012. This would also be in acknowledgement of the absence of a prudent statutory liquidity ratio.”
A Nostro account is an account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts are used to facilitate settlement of foreign exchange and trade transactions.
Biti said amounts in excess of the set thresholds would have to correspond to a bank’s demonstrable pending international payment obligations.
Allaying fears, Gono said the offshore balances will continue to be eligible for liquid asset ratio requirements.
Gono cited an improvement in liquidity already, saying the Reserve Bank would lift the previously announced cash withdrawal limits with effect from March 1 2012. Banks were encouraged to continuously apply the Know Your Customer (KYC) principle in order to avoid the abuse of cash. The bank was further urging the use of plastic money and cheques.
Gono alluded to an improvement in the RTGS where he said average RTGS balances had maintained a sustained increase from US$91,8 million in December 2011 to US$119,3 million in January 2012 and further to US$153,5 million for the first half of February 2012. The central bank governor disclosed that as at February 3 2012 the total banking sector deposits were US$3,45 billion whilst total loans were US$2,78 billion.
Taking a cue from Biti’s decision to further support the RBZ’s lender of last resort function, Gono said based on the size of the country’s GDP, it was estimated that an amount of US$150 million was required for the smooth functioning of the Lender of Last Resort. Against this background, government would avail an additional US$23 million by the end of next week towards the Lender of Last Resort Fund, to bring the total to US$30 million. Gono said the US$150 million required could not besustained by Treasury alone given the current challengesfacing government.
Efforts were underway to mobilise additional resources in excess of US$73 million. In this regard, the Reserve Bank would coordinate the establishment of a Special Purpose Vehicle (SPV) where financial institutions and otherinvestors will contribute to the Lender of Last Resort Fund.
The SPV would be owned by the contributors who would be shareholdersand will also be represented in the board running the affairs of the fund chaired by the Reserve Bank.
Following the resuscitation of the Lender of Last Resort the RBZ was encouraging banks to improve on the subdued deposit rates currently prevailing in the market. The RBZ was imploring banks to take a cue from its Overnight Accommodation rate on the directionof their lending rates.
The RBZ is to also launch instruments to be issued against its statutory reserve liabilities, with features such as prescribed asset status; liquid asset status; half-yearly coupon; tax exemption; tradable; and overnight accommodation status. The paper has varying tenors of between two and four years and interest rates of 2,5% to 3,5% per annum respectively. Another option is a 15 year bond at 3% per annum. Treasury willimmediately establish a Sinking Fund to cater forservicing of interest payments and maturities, Gono said.
In announcing measures to stabilise the banking sector yesterday, Biti said the proposed Banking Act review would focus on capital adequacy of banks and governance deficiencies in the banking sector.He said there was need to ensure that bank shareholders had no role to play in the management of banking institutions so as to limit the incidence of insider loans, abuse of depositors’ funds and conflict of interest.
Biti also said the Securities Act; Microfinance Bill; Insurance Act; and the Pensions and Provident Funds Act would be reviewed but did not elaborate on the nature of the changes.
Biti reiterated that banks would be compelled to merge in line with government’s goal of a strong financial services sector.
“It is regrettable that five banks still remain under-capitalised in spite of moving the deadlines for compliance several times,” said Biti. “Given the importance of having a strong and secure banking sector that is immune to systemic risk, I have mandated the Reserve Bank to develop a framework for mergers between the banking institutions.”He, however, said the modalities of mergers framework would be announced in due course.
Meanwhile Biti also announced government would issue infrastructure development bonds with almost the same features as the treasury bills save for the tenor, which will be for five years with an interest rate of 10% per annum.