Conrad Mwanawashe Business Reporter
STAKEHOLDERS in the financial services sector have raised concern over the proposed powers that empower the Registrar of Banks to unilaterally close banking institutions deemed to have failed. According to the Banking Act Amendment, the Registrar of Banks will fall under the auspices of the Reserve Bank of Zimbabwe and is empowered to wield the axe on financial institutions which fail to abide by legal and corporate systems set by the central bank.
The Parliamentary Committee on Finance and Economic Development on Monday said stakeholders in the financial services sector had raised the concerns during consultations on the Banking Amendment Bill.
They said entrusting too much power on an institution or an individual may lead to abuse. Responding to the committee’s concerns, RBZ governor Dr John Mangudya said the central bank does not have appetite to close banks. He said the powers as espoused in the Banking Act are aimed at ensuring that banks stick to core business and operate within the confines of the law.
The powers of the Registrar of Banks will also ensure that it has authority to nip insider loans which have become a bane for the banking sector. “We are looking at the historical and at the futuristic to ensure that the law protects everyone. I do not think we have appetite to abuse power. If you look at the Banking Act there are safeguards when a bank is closed because of too much power. Now there is the Constitutional Court to prove that the bank was closed because the Registrar did not like the bank,” said Dr Mangudya.
“I don’t think we have appetite to abuse the power of the Registrar but we have appetite to ensure that we have discipline in this economy. The level of indiscipline that has gone through this economy is what makes us to be where we are today as a country. Let’s just be disciplined enough. If you managing people’s funds, if you have been entrusted use them very well. I am not convinced myself that the banks that were closed were closed because of the power of the registrar. There was smoke.
‘‘We do not want to paint with a brush that the regulator didn’t like the banks. I have no appetite to close the banks. There was some bit of smoke. I have had opportunity to look at all the files so I am speaking from a privileged position,” he said.
Six banks have been closed for failure to meet obligations and Dr Mangudya said although he does not intend to close banks keeping bad apples will be difficult. Dr Mangudya said due to the hyperinflationary environment and the closure of the banks, many people lost savings in failed banks. He said this has traumatised Zimbabweans leading to them avoiding the formal banking system.
“Too many things have happened in this economy and people are traumatised because they lost money during the hyperinflation. Let’s never underestimate that trauma. We may not show it but it’s inherent.
‘‘We are dealing with a financially traumatised society. So we need to be very careful because they see losses and not benefit. That’s why you that as Zimbabweans we concentrate on negativity not positivity. That’s how we are dealing with trauma. The fear factor is high and we need to nurse that trauma,” he said. “People now want to have their cash near them. We are working as a central bank on strategies to improve financial inclusion and we will be announcing measures soon,” said Dr Mangudya.