A confidential RBZ report dated May 30 2012, seen by the Zimbabwe Independent and which details the liquidity positions of various banking institutions as at May 25 2012, exposes the extremely low liquidity positions of Interfin Bank and Genesis Bank, which have virtually locked up their entire deposit bases into non-performing loans and advances, leaving very little in their nostro accounts and RTGS settlement accounts. They also have very low cash holdings.
Both banks have reportedly failed to settle interbank obligations as well as customer withdrawals, with some customers being restricted to daily withdrawal limits of as low as US$50.
Interfin Bank, in particular, was the more exposed of the two, having a whopping US$105 489 614 in loans and advances against a paltry US$3 567 in its RTGS account, US$137 422 in vault cash and US$98 483 in its Nostros account. This renders the bank technically insolvent as it has minuscule resources to fund demands from its customers.
Given the interlinkages among banks, this position could cause much disruption in the banking community.
As of May 25 2012, Genesis bank had a mere US$4 600 in its RTGS account, only US$2 788 in cash (notes) and just US$1 090 in its nostro balances against US$1 141 392 in loans and advances.
Market watchers say supervisory action will have to be taken to rectify known weaknesses at Interfin and Genesis banks as they have been stuttering since the beginning of this year.
They say, however, Interfin is likely to be placed under curatorship to give it sufficient time to conclude ongoing discussions with potential investors which may result in the bank being adequately capitalised. The bank has been issuing cautionary statements in the media.
Sources in the banking sector say Genesis will have to be closed following its failure to regularise its capital position despite being indulged with major concessions and time extensions by the authorities.
Since the adoption of multi-currencies, Zimbabwe’s banking sector has been teetering on the brink of collapse as the majority of its 26 registered banks battled to raise the minimum capital requirements of US$12,5 million. The Reserve Bank repeatedly extended deadlines for meeting the thresholds and it was only early this year that the remaining banks managed to secure investment in the nick of time after Reserve Bank governor Gideon Gono virtually read the riot act to non-complying banks, threatening them with closure.
Banks that just managed to meet the March 31 deadline include Kingdom, Renaissance Merchant, and ZABG. Kingdom Bank was saved in the 11th hour by a US$9,5 million investment by AfrAsia Bank Ltd of Mauritius whilst Renaissance was thrown a US$24 million lifeline by NSSA.ZABG Bank , which needed US$15,3 million to plug its negative capital base and another US$12,5 million to meet the RBZ’s minimum regulatory capital threshold,reached an agreement with Unicapital of Mauritius and a local private firm, Trebor&Khays, for fresh capital injection to meet regulatory capital requirements
Since then it has been Interfin and Genesis that have remained outlying banks,struggling to meet the statutory minimum regulatory requirements on one hand,while failing to meet their financial obligations to customers on the other.
Interfin Bank has struggled since the arrest late October last year of its major shareholder FaraiRwodzi on charges of espionage. The bank started to experience a drain on its deposits which negatively affected its liquidity.
Asked to comment on the state of the banking sector, RBZ governor GideonGono said: “Two out of 26 banks are experiencing difficulties … one has a deposit base of about US$100 million while the other has a deposit of less than US$2 million in a market of about US$3,6 billion.” But he refused to name the two banks.
In spite of missing the capital deadlines, Genesis is in negotiations with a consortium of investors led by FMB of Malawi, who had initially indicated interest in acquiring a 93% stake in the bank. But the talks seem to have collapsed and were followed by an effort to rope in Prime Bank of Kenya, which later also abandoned its bid for a 12,5% shareholding in the bank.
Genesis was also linked to an investment consortium led by Frank Buyanga, who in April confirmed to the Independent that negotiations to acquire a stake in the bank had collapsed.
TheReserve Bank report, however, shows that the overall banking system is stable and market liquidity has improved significantly since March 1 2012 as shown by the increase in total RTGS balances held by banks which were US$333 million as at May 25 2012. Cash held in bank vaults at US$350 million now represents 21% of bank balances , whilst US$217 million is in banks’nostro accounts.
Interfin founder Farai Rwodzi was unable to comment last night, saying he was at a dinner. He promised to call back.