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Bank failures: Prevention is better than cure

As an African, one felt that the world was looking at my species as some ever-doomed and gloomed one. Apparently, news of the Ethiopian famine took long to make it to the American networks because famines were such a regular occurrence on the continent: they were not newsworthy until they were another Biafra, Nigeria’s secessionist’s state where more than a million people died from starvation after central government closed off food channels to what later remained a province of the central state.


In Zimbabwe, however, we have our own version of the ABC anchorman’s opening line: “And there’s been yet another bank collapse in Zimbabwe and this time it’s Interfin Bank.” 

Given the recurrence of such incidents, one begins to question the capacity of the Reserve Bank to effectively monitor and supervise the banking sector. And mind you, this is not questioning the bank under the current governor because similar events took place under the helm of his predecessors. As a  reminder, banks, or rather financial institutions, that faced the same fate as Interfin included Time Bank, CFX, First National Building Society, Zimbabwe Building Society, United Merchant Bank, Universal Merchant Bank and more recently, ReNaissance Merchant Bank, to name but a few, that is if this can be said to be a few. We are told Genesis Investment Bank is next in line.


If you dig up all the financial institutions that fell by the wayside in this country since the beginning of this century, you may come up with an average of one a year. Anyone want to place a wager on whose turn it is next year?

Bank failures do happen, even internationally, but not with the frequency they do in Zimbabwe. Pray we don’t get to the stage where bank failure doesn’t make it into the news unless humongous sums are involved, i.e. more than the US$100 million we understand might be the total prejudice to Interfin account holders.

Back to our question, where was the Reserve Bank when all the looting at Interfin was taking place? Wasn’t it only six months ago when the central bank promised that it would tighten its surveillance of the financial sector by conducting regular stress tests, among a plethora of banking jargon? Because as far as things stand, who needs stress tests are the Interfin depositors, many of whom have started going to the courts to demand their moneys back.

To expand on our famine analogy, perhaps the Reserve Bank also needs an early warning unit, like Sadc has to deal with imminent famine. Not that it will be listened to, as happened with the Sadc unit’s warning on the 1991-1992 drought, but at least if it exists, it might leak information to the press and the Reserve Bank could follow up with action. Has anyone noticed that it’s generally when information about faltering banks is put out in the media that the central bank responds? And when it does, it has an accurate picture of what happened?

Prevention is better than cure. But before this happens, opening a bank still remains the best way of making a quick buck. After all, the governor has said the doors are open. And when you’ve finished lending the public’s money to yourself, deep-pocketed Nssa will recapitalise your bank shell and you go scot-free. If the deposit protection board is capitalised, even better! So what are you waiting for?


By Itai Masuku

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