THE liquidity crisis at Tetrad Investment Bank has been further deteriorating showing an overall liquidity gap of a negative US$50,05 million as at June 30 2015, a report by the Provisional Judicial Manager(PJM) Deposit Protection Corporation (DPC) says.
The PJM’s report to the second Tetrad Creditors’ and Members’ meeting states that as at August 31 2015 the bank’s funding gap was largely unchanged at negative US$42,99 million as non-performing loans to total loans ratio was 99,86% as at June 30 2015.
This comes as it has also emerged a number of previously unknown investors tried to take over the bank and failed. The six capitalisation deals which were unsuccessful were driven by Mozimpex, Summit Development Group, Finance Bank of Zambia, Key Capital, Kuta Resources and finally Horizons Capital Consortium Pvt Ltd.
The DPC replaced Winsley Militala as PJM after he stepped down. Militala resigned amid sharp differences with the bank’s shareholders on the contents of his report. “The one for Horizon Capital Consortium Pvt Ltd that the bank had hoped would be the final solution is yet to bring any money, despite signing agreements in April 2014, no capital has been injected,” states the report. “There have been persistent changes in finalisation dates of the deal.”
However, the bank still has hope that investors will come along following the decision of the debt-to-equity swap by creditors in their meeting last week. Another investor, who was present during the Creditor’s meeting, Gustav Nigeria Ltd was in the country for seven days last week holding various meetings in a bid to invest in the bank.
The PJM said they are in discussions with the company and were waiting to be shown proof of funds by the investor.
According to the PJM’s report, Tetrad bank’s senior management structure was non-compliant with section 20(1) of the Banking Act (Chapter 24:20) as read with section 5 of the Banking Regulations Statutory Instrument 205 of 2000. The Act requires every banking institution to appoint in addition to the chief executive officer and chief accounting officer, officers responsible for risk management, lending and credit administration, operations and internal controls, investments and asset/liability management, treasury and foreign exchange operations, trust and fiduciary operations.
“Senior management structure became non-compliant following a series of board and senior management resignations since 2013,” reads the report.
As part of the causes of the failure of the bank it is stated in the report that the bank engaged in unethical business practices. These included deliberate misrepresentations of information, granting loans to insider and related parties without following due process and masking of loans to insider and related parties as placements with other banking institutions.
According to the report, as at June 30 2015, 99,86% of the total loan book amounting to US$63,60 million was non-performing. Insider loans amounting to US$19,653,879,86 constituted 31,07% of the loan book.
Other causes of failure of the bank include poor risk management, misalignment of corporate business strategy and financial resources as well as inadequate management information systems.
“While there were some corrective measures taken by the bank following the Reserve Bank of Zimbabwe inspection in 2013, harm had already been done as there were some open exposures that had already been created,” the report says.