Two Zimbabwean banks face collapse

Two more indigenous banks face collapse due to the persisting liquidity crisis' systemic risk inherent in the financial sector, a report released this week indicated.

In a 2014 first half analysis of Zimbabwe's economy, Econometer Global Capital (Econometer) warned that the country's financial sector was far from being solid.

"Contrary to the official position of Zimbabwean government, the banking sector is indeed safe but not sound with signs of widening cracks in the quality of assets, which calls for urgent attention," said Econometer in the report.

"By year end, we expect at most two indigenous banks either to falter or request for curatorship as their liquidity positions worsen while attracting deposits is becoming almost impossible," the research firm said.

It noted that in banking, the level of information asymmetry was very low to the extent that an average potential customer is aware of the risks to do with such banks.

"RTGS processing is a nightmare. Going forward, we do not anticipate any significant recovery…in the next 36 months," said Econometer.

This comes as Finance minister Patrick Chinamasa this week encouraged struggling indigenous banks to comply with the central bank's minimum capital requirements or face downgrading to micro-finance institutions. "If you say that you have found yourself in the top league and you clearly don't qualify, please go back to the league you qualify before we disqualify you," he told Parliament's Finance and Economic Development portfolio committee on Monday.

"We can't all be the same size, even as businesses and also even as financial institutions.

"But if you are in the third league you must not play the game of the premier league," the Treasury chief said. He added that authorities created an option for the establishment of deposit-taking micro-finance institutions to accommodate banks that are not adequately capitalised.

Several banks have in the past few years been shut down and a body set up to protect depositors' money is struggling to reimburse clients in the affected banks.

Of the $15 million, the Depositors' Protection Corporation (DPC), an autonomous statutory body established in 2003 under the Banking Act to administer the Deposit Protection Fund, has only paid $450 000, with each depositor receiving $500 at a time.

Under the prevailing set up, depositors, either individual or corporate, can only get ay maximum of $500, with the balance being settled through the liquidation process, which often drags on interminably.

As Zimbabwe's economy continues to falter, a number of banks have been forced to close, with Trust Banking Corporation closing last December, while Royal Bank ceased operating in July 2012 and Genesis Investment Bank had its licence revoked in 2012. Recently, the Reserve Bank of Zimbabwe cancelled Capital Bank Corporation's operating licence, which had more than $39 million of a security scheme.

Records indicate that Trust Bank owes depositors more than $2,5 million, Genesis owes about $1,4 million while Royal Bank is estimated to owe about $11,4 million.

Zimbabwe's central bank asked banks to have at least $100 million in deposits by June this year, but has pushed back that deadline until  December 31, 2020.

An estimated $2 billion circulates outside the banking system.