The Reserve Bank of Zimbabwe (RBZ) is roping in regional and international central bank authorities to assist Zimbabwe in bank supervision as part of a cocktail of measures to end problems bedevilling the banking sector, deputy RBZ governor Charity Dhliwayo has said.
Speaking at the Banking, Finance and Insurance Conference on Wednesday in Harare, the deputy governor said the central bank, through the consolidated supervisory framework, signed a memorandum of understanding with regional and international central bank authorities linked to the banking institutions in Zimbabwe to share experiences and insight on the performance of the Zimbabwean banks’ affiliates.
“There are banks which have subsidiaries out of the country, banking or non-banking entities. So we are now looking at the banks through consolidated supervision which will govern the banks supervision and also sharing information on how they are operating where ever they are operating from,” she said.
The deputy governor said the RBZ is also instituting constant risk-based supervision with banks to assess their strength. She said a consolidated supervisory framework, where bank subsidiaries are monitored to determine their viability, has been developed.
Dhliwayo added that amendments to the Banking Act will enhance corporate governance as most banks fail due to poor management and non-performing insider loans.
“Corporate governance is one of the areas that we want to enhance. If bank failure is as a result of recklessness, those responsible should be punished,” she said.
The deputy governor said the new Banking Act restricts individuals from having more than 10% shareholding in a bank. She said the central bank is pushing for non-performing loans (NPLs), which are over US$700 million, to be reduced to levels of around 5% from current levels of 14,5% after the Zimbabwe Asset Management Company (Zamco) absorbed part of the NPLs.
Zamco was set up with the aim to clear up banks’ balance sheets, providing relief to banks, as well as the interbank facility. Between 2009 and 2013, the country saw NPLs increasing from zero to 20% in September 2014.
The central bank introduced the interbank facility in March and has nine banks using the facility worth US$100 million. The interbank facility is managed by RBZ as an agent bank for Afreximbank for the purposes of managing the surplus and deficit participants’ requirements.
The interbank market allows banks to extend loans to one another for a specified term. Most interbank loans are for maturities of one week or less; the majority being overnight.
The absence of an interbank market had resulted in the market being segmented with some banks having huge surpluses while others have experienced acute liquidity challenges.