DELAYS in the liquidation of failed banks have hampered the operations of the Deposit Protection Corporation (DPC), businessdigest has learnt.
By Kudzai Kuwaza
In a wide-ranging interview this week, DPC chief executive John Chikura said the delay finalising the liquidation of failed financial institutions have hamstrung DPC’s efforts to compensate creditors and depositors of the affected banks.
“There are material deficiencies in the current problem bank resolution framework militating against attainment of finality and speedy resolution of failing or failed institutions,” Chikura said.
“There have been undue delays in bringing finality to the liquidation process due to lawsuits by former shareholders, to the detriment of creditors and depositors of closed banks.”
Chikura pointed out that liquidity challenges are negatively impacting on realisation of assets and debt recoveries.
“The recovery rate on debt collections has been very low due to absence of adequate collateral security on most facilities granted to insiders. Where collateral is available the realisable value is far below the facility exposure,” Chikura revealed.
He said several debtors are under liquidation, judicial management or have abandoned operations and this has also negatively affected the recovery rate from closed banks.
Chikura added that failure to access depositor records before a bank closures has militated against attaining a shorter turnaround time.
The delays in the liquidation of financial institutions due to legal wrangles have resulted in depositors and creditors failing to access their cash from the closed Capital Bank since it shut its doors in June 2014. The Reserve Bank of Zimbabwe closed the bank after the financial institution voluntarily surrendered its licence.
An June 18 2014 petition by Nssa for voluntary liquidation was opposed by the minority shareholders and employees of the bank. The court is yet to set a date for the hearing of the opposed matter.
Chikura said the Capital Bank saga shows the urgent need for a dispute resolution mechanism specifically for the banking sector.
“Currently, the institution is in no man’s land as neither the RBZ nor the DPC is presiding over its affairs,” Chikura said.
“This reinforces the need for a separate resolution regime for banks.”
He said that as at 30 June 2017, 11,667 out of 54,909 depositors by number had been compensated out of the Depositor Protection Fund (DPF), while in monetary terms about US$3,2 million (50%) had been paid against an exposure of US$6,4 million.
Total recoveries total recoveries in cash and properties for the seven failed contributory instiutions were US$34,8 million, Chikura said.
The DPC CE added that about USD$7,7 million had been paid out as dividends to creditors of the six failed contributory institutions under liquidation being US$6,52 million to preferred creditors and US$1,52 million to unsecured creditors.
Full interview to be published next week.