BY STAFF WRITER
THE financial services sector is headed for a major crisis, with bankers now saying they are struggling to manage their balance sheets following the Reserve Bank of Zimbabwe (RBZ)’s decision to compel them to surrender excess liquidity.
This makes uncertain banks’ paying interest on deposits. The decision is likely to deliver a huge blow to local companies which are in need of cash. It implies that cash would be tied with the central bank while the forex auction system has been failing to meet demand.
Early this month, central bank governor John Mangudya directed banks to surrender excess liquidity in return for Non-Negotiable Certificates of Deposit yielding 0% with effect from June 4.
Banking sector executives described the move as akin to expropriation of liquidity. This comes as the banking sector has been battling confidence issues with people preferring not to deposit their money.
Bankers Association of Zimbabwe (BAZ) president Ralph Watungwa this week told the Zimbabwe Independent that there was need for financial stability and policy consistency to restore lost confidence. He said BAZ had since engaged Mangudya over the issue.
“The banks will not have the ability to lend and it also means that any maturities will be nullified. For instance, let’s say there were treasury bills, before we lend them out to customers or roll them to another TB, and if we were getting 17%, it then becomes a zero. Operationally it becomes very difficult. It makes balance sheet management very difficult. Finally it makes the payment of higher interest rates on deposits questionable because if you are not lending to any interest how can you pay the depositor?” he said.
Watungwa said while the sector was trying to come up with campaigns that promote savings, it could only happen if there was stability.
He added that if policies were ever-changing people panic for fear of failing to realise the true value of their money.
“People need to be assured that their hard-earned savings will still have value by the time they need their money. We need to build confidence from the general public. We can only lend if we get money from depositors,” he said.
Watunga said plans were underway to educate the banking public on the benefits accrued from running savings accounts. “In those circumstances banks are quite willing to pay interest,” he said.
Banks have been paying between 1% and potentially 13% on savings accounts and 25% on fixed deposits.
“What we want is to encourage the population to move their money from the current account to savings so that we can pay those interests. We are working on a campaign to educate people on the value of savings. You will be aware that in the old days, building societies and other banks used to have products under which people could save for school fees, building homes or building their deposits for any other purposes,” he said.