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RBZ tightens screws on banks

The Reserve Bank of Zimbabwe (RBZ) is considering tightening screws on the banking sector by planning to make public bank ratings which show the health of banks to protect depositors, a senior central bank official has said.

By Hazel Ndebele

There has been public outcry in the past over the central bank’s reluctance to inform the public about the state of ailing banks before their closure.

Many banking institutions have collapsed, with several reports pointing to poor corporate governance and mismanagement for their failure. Banks which have gone under include Genesis Bank, Interfin, AfrAsia, Tetrad, Royal, Capital Bank, Trust, Allied and AfrAsia, among others

Speaking at the Institute for Sustainability Africa (Insaf) 2017 Annual Shareholders and Investors Forum in Zimbabwe, held at Celebration Centre in Harare, RBZ director of bank supervision Norman Mataruka said although banks were hesitant on ratings to be published, doing so was necessary as it would help depositors know the truth about the state of affairs at the institutions and make informed decisions.

Mataruka said most Zimbabwean banks have collapsed due to poor corporate governance practices and mismanagement which prejudice depositors.

“We were arguing some other time with a certain bank; we were telling them that in order for corporate governance matters to be taken seriously by banks, RBZ should start disclosing bank ratings so that depositors make their own wise decisions as to which bank to put their money with,” said Mataruka.

He said poor corporate governance by directors and senior managers of banking institutions are largely to blame for bank failures.

Mataruka said in any case it is already a requirement that when banks publish their annual and semi-annual financial statements, they must also publish supervisory ratings. He also told the forum that huge amounts of bank insider loans were also to blame for the collapse of financial institutions.

On the current cash crisis, Mataruka blamed big companies who handle cash daily of not make deposits. He said some of the companies were externalising money.

“The little foreign currency being generated is being externalised. The banks are only getting coins from these big institutions and supermarkets as that is all that they deposit. The notes will be destined elsewhere,” he said. According to Insaf, a number of companies have collapsed due to poor corporate governance while shareholders and investors watch. The investor’s forum agreed that it will develop a Code on Responsible Investing in Zimbabwe. The code is expected to outline responsible investing values and practices, corporate disclosure requirements while promoting space for effective minority shareholders voices. Mataruka endorsed the development of the code.

Insurance, Pension and Provident Funds Commissioner Tendai Karonga said without good corporate governance and disclosure, the integrity of capital markets is threatened and this may undermine economic growth.

“It goes without saying that indeed corporate governance has a strong bearing on the character of the country’s capital markets,” said Karonga.

“It is therefore critical that listed companies and other players in the capital market uphold the highest standards of corporate governance and transparency so as to attract investment as well as to satisfy stakeholder needs.”

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3 COMMENTS

  1. while corporate governance is admitably a major challenge in the banking sector, the overall macro economic sphere is less than conducive. the government macro economic policies if they may called so are not clear and often retroproductive. some of this so called externalisation is a necessary response to the uncertainty of receiving the deposited s worth from the financial institutions. only change of direction in the country s political leadership will restore an iota of hope and trust in the banking sector and in the formal economy at large.

  2. . The macro economic environment is being made toxic by the lack of political will at the top to deal with corruption, policy inconsistency,good corporate governance and politics of patronage. Lets have the bank ratings made public in order to make directors/managers at banks shape up. Why protect bad performance which leads to the public being caught unaware of ailing banks and fail to move their money to safer banks. Those banks that are unable to compete in any environment should be shut down but with the public being given information as things happen.

  3. . The macro economic environment is being made toxic by the lack of political will at the top to deal with corruption, policy inconsistency,good corporate governance and politics of patronage. Lets have the bank ratings made public in order to make directors/managers at banks shape up. Why protect bad performance which leads to the public being caught unaware of ailing banks and fail to move their money to safer banks. Those banks that are unable to compete in any environment should be shut down but with the public being given information as signals of likely failure well in time to avoid or minimize its effects.

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