Published: 29 January 2014

The Reserve Bank of Zimbabwe has put in place various measures aimed at reaffirming the role of the central bank and restoring stability to the banking sector.

Presenting the Monetary policy statement today, acting RBZ governor Dr Charity Dhliwayo said there had been an increased abuse of loans and advances by insiders and related parties, particularly directors and shareholders resulting in high levels of non-performing insider loans.

She said the non-performing loans to total loans ration as at December 31 stood at 15,92 percent.

"Henceforth, no bank shall grant loans to insiders and related interests except where such credit is granted as part of the employees' conditions of service and is available to other employees.

Individuals and companies may, however access loans from other banking institutions where they are not classified as insiders or related parties," she said.

Banking institutions will be expected to review existing insider loans and provide a report to the central bank. Dr Dhliwayo said existing insider loans will not be renewed or rolled over.

Banks will also be expected to justify any increases in their charges or interest rates before the central bank can approve them from October 31 this year.

"This will assist the regulator in monitoring ‘collusion' on pricing as well as evaluating banks' cost structures in relation to bank charges," Dhliwayo said.

In addition to making transactions in six currencies that were adopted in 2009, Zimbabweans will be able to make transactions using the Australian dollar, Chinese yuan, Indian rupee and the Japannese yen.

On the capitalisation of the banking sector, Dhliwayo said capital levels would remain at the current levels of $25 million for commercial and merchant banks, $20 million for building societies, $15 million for discount and finance houses and $5 million for microfinance banks.

The deadline for compliance with the new capital levels of $100 million for commercial and merchant banks, $80 million for building societies, $60 million for discount and finance houses, $10 million for microfinance banks and $25 000 for microfinance institutions was extended to December 31 2020.

Dhliwayo said banking institutions were expected to submit comprehensive recapitalisation plans to the RBZ by June 30 this year. She said banks that banks are facing challenges in implementing their recapitalization plans should consider consolidation or mergers, dilution of shareholding by potential investors as well as converting their banking licenses to deposit taking microfinance institutions.

The Governor said the central bank is also working with the ministry of Finance to review the Banking Act.

"The new provisions will also seek to introduce criminal as well as civil liability of any shareholder, director or senior manager of a banking institution, who will be found to have acted negligently or fraudulently, resulting in loss of money to depositors or failure of a banking institution," she said.

She said the central bank would also engage relevant authorities in the establishment of a Commercial Court that would be dedicated to adjudicating commercial and banking related cases.
- bh24

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