Ministers vow to block Gono’s new measures

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Tendai Marima
FRESH clashes have erupted over banks after Reserve Bank governor Gideon Gono this week raised the minimum capital requirements for commercial and merchant banks by a massive 700% to US$100 million from US$12,5 million, in a bid to force mergers and recapitalisation to consolidate the fragile sector.
This triggered a reaction from cabinet ministers who on Tuesday resolved to block the new demands.
Sources said while the governor was on Tuesday making the announcement from his offices at 88 Samora Machel Avenue in Harare, a high-level government meeting along the same street was taking place at the Office of the President and Cabinet where ministers blocked his proposals.
Some ministers at the meeting argued from an indigenisation point of view, while others pushed economic angles. Gono’s rivals, driving the controversial indigenisation policy to take over foreign-owned banks, claimed his move was designed to protect foreign financial institutions and collapse locally-owned ones. Others said the current thresholds were relatively sound given Zimbabwe’s small US$10-billion economy.
“In the Ministry of Finance’s original proposal, minimum capital requirements for commercial banks were set at US$30 million,” one minister said, indicating a statement would soon be released to veto Gono’s proposals.
In his mid-term monetary policy statement on Tuesday, Gono not only hiked the minimum requirements for commercial and merchant banks, but also for building societies by 700% to US$80 million from US$10 million and for microfinance institutions by 400% from US$1 million to US$5 million.
This comes against a background of a series of bank collapses in 2004 and the recent closure of Genesis Investment Bank,  Interfin Banking Corporation and Royal Bank last week. Last year, ReNaissance Merchant Bank was also closed. Most of the remaining 23 banks  are weak and unsound.
Given problems affecting the banking sector, Gono has been criticising malpractices such as insider loans, concentrated shareholding and neglect of fiduciary duties to lenders and depositors. On Tuesday he lamented what he described as “a fragmented banking system characterised by numerous weak and under-capitalised banks” before proposing mergers, acquisitions and recapitalisation to consolidate the sector.
Asked about the situation, Gono yesterday said he was not aware of any resistance to the new requirements. “I’m not aware of what you are referring to as intentions to reverse my monetary policy measures by anyone or any quarter,” Gono said. “Until such a time that I’m in the picture of that development, I cannot comment.”

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