Banks comply with new capital requirements

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Faith Zaba

SEVERAL banks are taking steps towards complying with the minimum capital requirements announced by the Reserve Bank of Zimbabwe (RBZ) last week, while others have already technically met the terms, as it emerged there was fierce debate on the issue in cabinet on Tuesday.

 
CBZ, MBCA (owned by South Africa’s Nedbank), Standard Chartered Bank, BancABC, ZABG, Kingdom, Stanbic owned by South Africa’s Standard Bank, and FBC have written letters to RBZ governor Gideon Gono indicating they have complied, or are in the process of complying with the new requirements.

 
This comes after heated debate following Gono’s measures last week which initially saw cabinet ministers rejecting the proposals before endorsing them on Tuesday after clashes in a tense cabinet meeting chaired by President Robert Mugabe. Gono also attended the meeting to explain his new demands.

 
In a letter to Gono, seen by the Zimbabwe Independent dated August 6 2012, CBZ group CEO John Mangudya says the group’s subsidiaries, CBZ Bank and CBZ Building Society, are already capitalised at levels of US$68 million and US$39 million, respectively, giving a consolidated capital position of US$107 million at end of June 2012. This means if the entities merge, they would already be in full compliance.

 
“We are therefore compliant and comfortable with the policy of enhancing capitalisation of the financial sector in Zimbabwe in order to give the sector the necessary stability,” Mangudya says.

 
FBC CEO John Mushayavanhu said his bank was ready to comply.

 
“Our bank has already come up with a plan to comply with these requirements by the given dates,” he said. “FBC Bank is an indigenous bank, with indigenous shareholders, and if we are able to comply, we do not see why other banks should not also comply. There is need to consolidate the banking sector so that we remain with fewer big banks compared to the current situation where we have numerous vulnerable banks.”

 
BancABC said it was already in the process of fulfilling new requirements as it now has a capital base of US$52 million, adding it would be fully compliant by June 30 2014.
In a move which allayed fears smaller banks would fail to meet the new demands, Kingdom Bank group CEO Lynn Mukonoweshuro said her bank was in the process of raising US$50 million through the issue of convertible preference shares.

 
ZB, ZABG, MBCA, Standard Chartered Bank and Stanbic are also in the process of “reviewing the capital requirements to meet the new thresholds”.

 
The new measures require commercial and merchant banks to build up their paid up equity capital to US$100 million from US$12,5 million and US$10 million respectively. Building societies are required to meet US$80 million new capital levels from US$10 million, while discount and finance houses are expected to put up US$60 million compared to the current US$7,5 million to support their operations. Micro finance institutions’ minimum capital base was raised from US$1 million to US$5 million.

 
Ministers told the Independent there was intense debate in cabinet over the issue.
Acting Finance minister Gorden Moyo announced on Wednesday cabinet had endorsed the minimum capital requirements for banks on Tuesday. However, Moyo did not disclose there were serious clashes over the issue.

 
Gono was summoned to cabinet to explain his proposals. Moyo said ministers initially had “a number of questions” which were cleared on Tuesday in what some ministers said was a heated meeting.

 
Ministers said Gono had to weather the storm before his proposals were endorsed.

 
First to attack Gono on Tuesday was deputy prime minister Arthur Mutambara, who argued the new thresholds were too high.

 
Sources said others who slammed Gono included Energy minister Elton Mangoma and deputy premier Thokozani Khupe.

 
However, vice-presidents John Nkomo and Joice Mujuru and Defence minister Emmerson Mnangagwa and Herbert Murerwa, among others, defended Gono who had to present documents and explain his proposals before ministers endorsed them.

 
Sources said Gono had before the meeting written to Mugabe and met him on Monday to explain the situation, moves which ensured he survived a storm which could have swept him out of office.

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