HomeLocal NewsGovt tightens screws on bankers

Govt tightens screws on bankers

GOVERNMENT is tightening screws on delinquent banking sector executives accused of triggering the collapse of financial institutions and prejudicing depositors of millions of dollars in the process.

Hazel Ndebele

Since dollarisation in 2009, several banking units have folded, with the Reserve Bank of Zimbabwe and independent forensic audits pointing to poor corporate governance and mismanagement.

Financial institutions which closed include Barbican, Century, Genesis, ReNaissance, Interfin, AfrAsia, Tetrad, Royal, Capital, Trust and Allied, among others.

Now the Deposit Protection Corporation (DPC), a quasi-governmental entity, is preparing summons against directors and shareholders of AfrAsia Bank Zimbabwe, which closed in 2015, over the alleged abuse of depositors’ funds.

This comes after government amended the Banking Act, demanding more accountability from executives and outlawing owner-managed banks.

AfrAsia Bank Zimbabwe closed in February 2015 after its shareholders surrendered its banking licence when it became clear that its liabilities outstripped assets.

The bank’s massive liabilities exceeding US$100 million, low capitalisation and a damaged reputation stemming from a costly legal wrangle left creditors, including thousands of depositors, in the lurch.

Informed sources this week said that the DPC, through its lawyers Scanlen & Holderness, is preparing summons against shareholders and directors of the failed bank.

“The lawyers of the DPC are in the process of drafting summons to the directors and shareholders of AfrAsia over misuse of funds,” a source said.

“Summons have already been issued to shareholders and directors of other banks such as Royal and Trust. The directors of those issued with the summons have said they will file an appearance to defend. The DPC is going after all of them.”

The summons against AfrAsia shareholders and directors come after a forensic audit was conducted on the now defunct financial institution by Grant Thornton. The audit was ordered by the DPC in line with a mandate from the creditors to follow-up on parties who allegedly abused depositors’ funds.

The DPC, sources said, has also written to the Reserve Bank of Zimbabwe for permission to carry out a forensic audit on all subsidiaries of Tetrad Holdings and not just the bank.

Tetrad Investment Bank — the last merchant bank in the country’s financial services sector which went under due to bad loans, poor corporate governance and mismanagement, was declared insolvent in August 2015 with its negative capital standing at US$51,7 million as of August 31.

Creditors opted for a debt-for-equity swap in a last-minute attempt to breathe life into the troubled financial institution after the bank’s judicial manager, the DPC, proposed the do-or-die arrangement.

DPC chief executive John Chikura declined to comment on the latest blitz against directors and shareholders of failed banks who so far have got away with looting and squandering millions in depositors’ funds.

“It is not prudent for me to comment on any of these issues at this point in time,” Chikura said when contacted for comment.

Chikura, however, told the Zimbabwe Independent in an interview in June 2015 that the delay by the central bank in withdrawing the licences of distressed banks allowed shareholders and management in the troubled institutions to strip assets, leaving very little for affected depositors.

Amid many previous bank failures on the banking landscape, a new wave is now sweeping across Zimbabwe’s corporate terrain albeit blowing slowly.

Zimbabwe adopted a new National Code on Corporate Governance in 2015 setting the tone for government to play catch-up with developed countries that adhere to international standards on corporate governance.

Recent Posts

Stories you will enjoy

Recommended reading