THE Reserve Bank of Zimbabwe yesterday blamed poor corporate governance, failure by bank executives to adhere to international best practices and mismanagement for triggering a wave of bank failures before and after the introduction of the multi-currency system in 2009.
Zimbabwe Independent Comment
Before 2009, a number of banks collapsed. The post-dollarisation period has seen eight banks — Genesis, Capital, Interfin, AfrAsia, Tetrad, Royal, Trust and Allied — going under prejudicing depositors of their hard-earned cash and destroying trust in banks, key financial intermediaries.
The role of the central bank and audit firms — which a few months before the closures had re-assured depositors and other stakeholders alike that the closed banks were safe and sound — immediately came under scrutiny. Nearly all forensic reports for the closed banks have pointed to shareholder delinquency as the catalyst to the bank collapses. The irony, however, is that despite the trend that bad corporate governance was largely to blame for the collapse of the financial institutions, most bank failures in Zimbabwe have been followed by either placement into curatorship or direct liquidation. For an industry anchored on trust, attempts to resurrect moribund financial institution are yet to yield positive results in Zimbabwe. So why waste depositors’ funds and precious time on such clearly wasteful processes?
Experts say another factor that has caused the folding of banking institutions is the new US$100 million minimum capitalisation requirement announced two years ago by the central bank, which turned pre-dollarisation good managers into bad managers as most owner-managers had no outside capital to inject into their banks. The new requirements forced bankers/shareholders to engage in frantic efforts such as venturing into non-core banking activities to shore up their balance sheets, with little success.
While long overdue, remarks by the RBZ head of supervision Norman Mataruka that boards of directors and senior managers at banks should now be held accountable for running down banks are commendable, but punitive measures are needed to stop the rot.
Mataruka said ongoing reforms in the fragile financial services sector will improve the levels of disclosure, accountability and be punitive on executives and directors who dip their hands into the till resulting in the demise of the banks.
Government should make penalties for errant bankers more drastic not only to protect the integrity of the sector, but also shield depositors who toil under one of the most difficult economic environments on the continent to get the little they deposit.
Under the yet-to-be gazetted changes to the Banking Act, an executive who runs down a bank by abusing depositors funds serves a shorter jail sentence than a livestock thief. The new measures, among other stipulations, also call upon non-executive directors of financial institutions to step down should they default on insider loans.
All said and done, depositors’ funds, no matter their quantum, should be protected from greedy and parasitic bank executives who lead lavish lifestyles they can’t afford. Bankers who steal depositors’ funds must simply go to jail for longer periods than livestock thieves.