THE Reserve Bank of Zimbabwe (RBZ) is working on modalities to resuscitate insolvent banks within the period of one year , the central bank governor has said.
Addressing stakeholders at the Banks and Banking Survey awards ceremony during a breakfast meeting hosted by Zimbabwe Independent, RBZ governor John Mangudya said he was in the process of building a sound financial sector to safeguard financial stability and economic recovery.
The governor said he would assist with the revival of Tetrad, Metbank, Allied Bank and AfriAsia banks currently reeling under serious liquidity challenges and are on the verge of collapse also due to poor corporate governance and lack of fresh working capital.
Mangudya said he has set up a cocktail of measures which will turnaround the banks operations.
He said to expedite the revival of the struggling banks, the RBZ has set up Zimbabwe Asset management Corporation (Zamco) to deal with non-perfoming loans (NPLs), credit reference system and interbank market as well as capitalising the RBZ as lender-of-last-resort.
“We need to find the resolution to cleanse the financial sector so that no one is incapacitated in doing business. We want to have banks which provide services. We are doing it in a sequential manner. We hope that this combination is going to resolve the problem. We are governed by principles, engagement and compromise to move forward,” Mangudya said.
He added:“The whole idea is about removing bad apples. We are currently doing it and within 6-12 months we should be done with it. Even if banks are small, we are still concerned.”
The central bank governor said a number of institutions have collapsed not only due to lack of working capital but also due to poor corporate governance.
He added that the major problems facing the financial sector was “self feeding challenges of sluggish economic growth and non-performing loans”.
“Non–performing loans are dragging down the national economy at a level of 20% of total loans and advances as at 30 September 2014. NPLs definitely need to be addressed. They are contagious,” said Mangudya.
The apex bank chief said the multicurrency created the myth that all economic challenges had disappeared and encouraged excessive risk taking by individuals and companies who borrowed more than they could reasonably expected to repay.
He said the underlying assets that were offered as collateral security were also overvalued and banks granted loans on the basis of these artificially highly priced assets.
Mangudya added that the central bank was working with various stakeholders to establish the commercial court to deal with borrowers who need to service their loans. He also said an array of reforms were coming in the banking sector as they have been approved by Cabinet, signalling serious efforts to consolidated and reinforce the system which lies at the heart of the economy.