Business / Companies
Banks to reduce charges substantially
01 Feb 2013 at 01:02hrs | Views
BANK charges will soon be reduced substantially following negotiations between the banking sector and the Reserve Bank of Zimbabwe amid concerns that the current level of charges was against international banking practice.
Reserve Bank Governor Dr Gideon Gono disclosed this while presenting his 2013 Monetary Policy Statement in Harare yesterday.
Full Monetary Policy Statement here:
He said 25 banks yesterday signed a memorandum of understanding that will chart the way forward.
"Zimbabweans across the board are agreed that the level of bank charges is out of line with international best practice. It is heartening to note that after 75 days of negotiations, the Reserve Bank of Zimbabwe and the banking sector came up with an agreed framework which will see substantial reduction in bank charges," said Dr Gono.
Some of the issues covered under the MoU include a clause that the participating financial institutions will be obliged to pay interest on amounts of $1 000 and above held over a period of at least 30 days.
The agreement also sets cash withdrawal fees, debit card and ledger fees.
He said 14 out of 22 banks had met the first level of minimum requirements by 31 December last year.
Five other banks, Dr Gono said, had made "significant" progress towards complying while two others needed to come up with more "credible" recapitalisation plans.
The central bank raised minimum capital levels for banking institutions last year with commercial and merchant banks required to have capital levels of $100 million from $12,5 million and $10 million respectively. Minimum capital for building societies were raised from $10 million to $80 million, finance and discount houses from $7,5 million to $60 million and $1 million to $5 million for microfinance institutions.
They should be fully compliant by June next year, but were required to meet 25 percent of the new capital levels by 31 December last year.
"In the interest of transparency and accountability, I am pleased to report that a total of 14 banking institutions met the 31 December 2012 minimum threshold," said Dr Gono.
Banks that have complied are CBZ Bank, Standard Bank, Stanbic, BancABC, Barclays, ZB Bank and Kingdom. Others are Ecobank, FBC Bank, MBCA Bank, TN, CABS, Tetrad and NMB Bank.
Agribank, FBC Building Society, Trust Bank, Metbank and ZB Building Society banks have made significant progress, Dr Gono said, adding that the other two, ZABG Bank and Capital Bank, still need to come up with their recapitalisation plans.
ZABG Bank was negotiating for a $40 million facility with the National Indigenisation and Economic Empowerment Fund. Interfin remains under curatorship.
Dr Gono said the central bank had finalised a blueprint of the Banking Sector Vision 2020. The vision is centred around the pursuance of banking sector solvency and stability to anchor sustained economic growth and development.
It seeks to achieve, among other things, a thriving banking sector with functional lender of last resort and active inter-bank market, the establishment of universal banks and an integrated framework, adequately capitalised and competitive banking sector with the ability to support the funding needs of the economy.
Dr Gono said the banking institutions would be required to subject themselves to annual external credit rating assessments by credit rating agencies accredited by the RBZ.
The governor also unveiled measures to support the small to medium enterprises sector which would see 30 percent of total loans advanced to SMEs.
Given the current banking sector loans of $3,5 billion as at 31 December 2012, an allocation of 30 percent to the SME sector will translate to loans of $1,05 billion.
"Given the foregoing banking institutions are required to reorient their portfolios such that loans to the SME sector should constitute at least 30 percent of the total loan book. The Reserve Bank will conduct monthly assessments to monitor compliance and any institution found wanting, will face severe penalties," he said.
Dr Gono said the RBZ was in the process of coming up with credit bureaus, with the completion of the framework targeted for March 2013. The credit bureaus provide information to subscribers about individuals and corporates or any other institutions' creditworthiness.
On the indigenisation of foreign owned banks, Dr Gono said the RBZ was working closely with the Ministry of Youth Development, Indigenisation and Empowerment to ensure that all banks observed the laws of the land and complied in an orderly manner.
"The process to indigenise the banks should, however, take cognisance of the sensitivities around the operation of the banks to restore confidence, trust and stability in the sector".
Dr Gono also expressed concern over the increasing circulation of fake US dollar and South African rand in Harare, Bulawayo and other parts of the country. He urged people and retailers to be on the lookout for such fake notes.
He challenged microfinance institutions, who have been accused of charging high interest rates, to justify their high rates as some of them have been charging rates of up to 33 percent.
"We cannot tolerate that. All microfinance institutions are required to justify interest rates and all other charges levied on borrowed funds as well as adequately disclose their business conditions".
Reserve Bank Governor Dr Gideon Gono disclosed this while presenting his 2013 Monetary Policy Statement in Harare yesterday.
Full Monetary Policy Statement here:
He said 25 banks yesterday signed a memorandum of understanding that will chart the way forward.
"Zimbabweans across the board are agreed that the level of bank charges is out of line with international best practice. It is heartening to note that after 75 days of negotiations, the Reserve Bank of Zimbabwe and the banking sector came up with an agreed framework which will see substantial reduction in bank charges," said Dr Gono.
Some of the issues covered under the MoU include a clause that the participating financial institutions will be obliged to pay interest on amounts of $1 000 and above held over a period of at least 30 days.
The agreement also sets cash withdrawal fees, debit card and ledger fees.
He said 14 out of 22 banks had met the first level of minimum requirements by 31 December last year.
Five other banks, Dr Gono said, had made "significant" progress towards complying while two others needed to come up with more "credible" recapitalisation plans.
The central bank raised minimum capital levels for banking institutions last year with commercial and merchant banks required to have capital levels of $100 million from $12,5 million and $10 million respectively. Minimum capital for building societies were raised from $10 million to $80 million, finance and discount houses from $7,5 million to $60 million and $1 million to $5 million for microfinance institutions.
They should be fully compliant by June next year, but were required to meet 25 percent of the new capital levels by 31 December last year.
"In the interest of transparency and accountability, I am pleased to report that a total of 14 banking institutions met the 31 December 2012 minimum threshold," said Dr Gono.
Banks that have complied are CBZ Bank, Standard Bank, Stanbic, BancABC, Barclays, ZB Bank and Kingdom. Others are Ecobank, FBC Bank, MBCA Bank, TN, CABS, Tetrad and NMB Bank.
Agribank, FBC Building Society, Trust Bank, Metbank and ZB Building Society banks have made significant progress, Dr Gono said, adding that the other two, ZABG Bank and Capital Bank, still need to come up with their recapitalisation plans.
ZABG Bank was negotiating for a $40 million facility with the National Indigenisation and Economic Empowerment Fund. Interfin remains under curatorship.
Dr Gono said the central bank had finalised a blueprint of the Banking Sector Vision 2020. The vision is centred around the pursuance of banking sector solvency and stability to anchor sustained economic growth and development.
It seeks to achieve, among other things, a thriving banking sector with functional lender of last resort and active inter-bank market, the establishment of universal banks and an integrated framework, adequately capitalised and competitive banking sector with the ability to support the funding needs of the economy.
Dr Gono said the banking institutions would be required to subject themselves to annual external credit rating assessments by credit rating agencies accredited by the RBZ.
The governor also unveiled measures to support the small to medium enterprises sector which would see 30 percent of total loans advanced to SMEs.
Given the current banking sector loans of $3,5 billion as at 31 December 2012, an allocation of 30 percent to the SME sector will translate to loans of $1,05 billion.
"Given the foregoing banking institutions are required to reorient their portfolios such that loans to the SME sector should constitute at least 30 percent of the total loan book. The Reserve Bank will conduct monthly assessments to monitor compliance and any institution found wanting, will face severe penalties," he said.
Dr Gono said the RBZ was in the process of coming up with credit bureaus, with the completion of the framework targeted for March 2013. The credit bureaus provide information to subscribers about individuals and corporates or any other institutions' creditworthiness.
On the indigenisation of foreign owned banks, Dr Gono said the RBZ was working closely with the Ministry of Youth Development, Indigenisation and Empowerment to ensure that all banks observed the laws of the land and complied in an orderly manner.
"The process to indigenise the banks should, however, take cognisance of the sensitivities around the operation of the banks to restore confidence, trust and stability in the sector".
Dr Gono also expressed concern over the increasing circulation of fake US dollar and South African rand in Harare, Bulawayo and other parts of the country. He urged people and retailers to be on the lookout for such fake notes.
He challenged microfinance institutions, who have been accused of charging high interest rates, to justify their high rates as some of them have been charging rates of up to 33 percent.
"We cannot tolerate that. All microfinance institutions are required to justify interest rates and all other charges levied on borrowed funds as well as adequately disclose their business conditions".
Source - TC
