‘Govt order to restore banking confidence’

THE government’s instruction for the banking sector to inject US$7,6 million as well as revised premiums in the deposit protection fund by year end, will help restore confidence in the sector, an official at the Deposit Protection Corporation (DPC) has said.

Kudzai Kuwaza

In his fiscal statement last year, former Finance minister Tendai Biti ordered the banking sector to pay US$7,6 million to capitalise the deposit protection fund.

Biti also increased the maximum deposit cover, which is the amount of money given to a depositor by the DPC in the event of a bank failure, from US$150 to US$500.

DPC CEO John Chikura told businessdigest this week that since the beginning of the year they have been paying out US$500 to depositors of Royal Bank, which shut down operations last year.

He revealed that DPC had to date paid deposit cover for 18% of the bank’s depositors as well as 63% of the defunct Genesis Bank’s depositors.

He said depositors who had more than US$500 in the bank would receive the remaining amount after the liquidation of the banks.

Chikura said the need to capitalise the fund has become more urgent given that several banks are struggling to honour transactions, which could signal more bank failures.

“If you look at the market, without mentioning names it is apparent there are some banks where depositors are struggling to withdraw their money,” Chikura said.

“That’s the reason we want the deposit protection fund to be capitalised because if any of these banks failing to raise capital have to close or if the (Reserve Bank) governor decides to close them down, where will we find the money to pay the depositors?”

He said DPC’s target was to cover at least 90% of bank depositors in the market and give them back their money in full.

On this basis depositors were supposed to be given a maximum deposit cover of US$1 000, but this could not be done due to lack of funding, he said.

Chikura, who is also on the corporate governance committee of the Institute of Directors of Zimbabwe, said there was need for listed companies in the country to improve the disclosure process to their shareholders.

In other countries, the five highest paid executives of a listed company disclose their salaries to shareholders to promote transparency, a far cry from locally-listed companies, he said.

Chikura said Zimbabwean companies were seriously affected by issues of conflict of interest especially among board members.

“The issue of conflict of interest is a serious issue and we need strong rules, strong regulations on the management of conflict of interest.”

There was need for the Zimbabwe Stock Exchange and Securities Commission to be involved in the management of conflict of interest, Chikura said.

He said there was need to amend the Companies Act, which is “old and archaic,” and no longer relevant to the current market needs.
The National Corporate Governance Code, Chikura said, would soon be launched and should be reflected in the Companies Act, giving it the force of law.

He said he had held meetings with former Justice minister Patrick Chinamasa on the need to amend the Companies Act and plans to meet the newly-appointed Justice minister Emmerson Mnangagwa to discuss the issue. In his discussions with government officials he pointed out the lack of expertise and funding to amend the Act.

Chikura said they have an expanded mandate under the new Deposit Protection Corporation Act Chapter 24:29 which involves the DPC in the liquidation and curatorship of banks. The mandate enables the DPC to look after the interests of depositors more than under the previous Banking Act.

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