RBZ Acting Governor Charity Dhliwayo
Golden Sibanda Senior Business Reporter
BANKS minimum capital levels have been maintained at December 2013 levels, but financial institutions are required to submit compliance plans by June 2014, the Reserve Bank has said. Presenting the 2014 Monetary Policy Statement yesterday acting RBZ Governor Dr Charity Dhliwayo said banks are required to meet the new minimum capital thresholds by December 2020.
Dr Dhliwayo said minimum capital requirements will remain at current levels of US$25 million for commercial banks, US$25 million for merchant banks, US$20 million of building societies, US$15 million for discount and finance houses and US$5 million for micro-finance banks.
“Nevertheless, compliance with Cabinet approved levels have now been moved to 31 December 2020,” Dr Dhliwayo said when presenting her maiden MPS at the central bank in Harare.
“In this regard, all banking institutions are required to submit to the Reserve Bank, comprehensive recapitalisation plans to meet the new deadline, by June 30, 2014,” she said.
Dr Dhliwayo said the decision was taken in light of the attendant challenges in the macro-economic environment and in conformity with Finance Minister Patrick Chinamasa’s proposal in the 2014 National Budget.
Ex-RBZ Governor Dr Gideon Gono had raised minimum thresholds for commercial and merchant banks to US$100 million from US$12,5 million and US$10 million respectively in June 2012.
Thresholds for building societies were raised from US$10 million to US$80 million, finance and discount houses from US$7,5 million to US$60 million and US$1 million to US$5 million for micro-finance institutions.
Initially, full compliance was set for June 2014 with banks required to meet 25 percent of the new thresholds by December 2012, 50 percent by June 2013 and 75 percent by end December 2013.
Banks have always expressed reservations about the level of the new minimum capital thresholds insisting they were too high for an economy reeling from a suffocating liquidity crisis.
However, Dr Dhliwayo said the RBZ will monitor and evaluate progress made by banks towards attainment of capital milestones as outlined in their respective recapitalisation plans.
Reserve Bank urged the banking institutions to continue their efforts to strengthen their capital positions in order to maintain relevance and stability in an illiquid economy.
The apex bank contends that by building and maintaining adequate capital, banks are able to play a supportive role by mobilising surplus investible funds on the money and capital markets.
These would be deployed to productive sectors for the realisation of the key objectives of Government’s new economic blueprint, Zimbabwe Agenda for Sustainable Socio-economic Transformation 2014/18.
The central bank said some banking institutions are facing challenges including undercapitalisation, high levels of non-performing loans, poor earnings performance and liquidity constraints.
Despite these challenges some of the banking institutions remain reluctant to consolidate their operations or merge with other institutions where this is considered to be a viable option.
Dr Dhliwayo said the RBZ banking institutions facing challenges should immediately take concrete steps towards consolidating and or merging their operations, dilution of shareholding by potential investors and converting licences to deposit taking micro-finance institutions.