Business / Economy
Banking sector safe and sound says Gono
28 Jun 2011 at 21:57hrs | Views
The Reserve Bank Governor Dr Gideon Gono has ruled out the prospect of immediate bank closures or amalgamations after Thursday's
recapitalisation deadline saying the industry is safe and sound.
In a briefing on the state of the banking sector in Harare yesterday, Dr Gono dismissed statements by a multiplicity of "experts" on bank closures and other such fears as un-founded. He also took a swipe at the International Monetary Fund for its report early this month that stated that the banking sector was in trouble.
"But who is the IMF? I am the central bank governor here. The IMF comes here for two or three days and they have the guts and confidence to give comments about the banking system?
"I call that abuse of the pulpit. Simply because they have the economic pulpit from which to make comments on countries and sectors . . . that does not make them saints at all. If they were, they would not have gone through the receding economic meltdown which started in their own backyard.
"Only those with limited exposure and depth will swallow hook, line and sinker what the IMF said.
"They are mere human beings and economists but we have intimate knowledge of the sector. I know where Gokwe is, I know where Dotito or Bulawayo is, but all they do is come and sit in hotels and make comments."
Dr Gono said it was unfortunate that such institutions as the IMF sought to speak authoritatively on issues they did not have much information about.
He challenged Zimbabweans to be wary of such statements.
"As Zimbabweans, we must begin to have confidence in ourselves and realise that we are on our own. If one had a doctor, in this case the IMF, who makes prescriptions after prescriptions each time he visits without delivering anything to the table what would you do? In my book I would fire the doctor," said the charged RBZ chief.
Dr Gono assured the public that there was no need to panic. Over the past few weeks, there have been reports of some banks that were said to be on the brink of collapse due to failure to meet the recapitalisation deadline.
Commercial banks are expected to increase their capital bases to US$12,5 million while merchant banks need US$10 million. Building societies are expected to have US$7,5 million by tomorrow.
Dr Gono stressed the deadline would not be extended.
The central bank chief said information at hand and results from on-site and off-site periodic checks showed that all was well.
"Generally the banking sector is safe and sound notwithstanding that over the last four weeks we put one institution under curatorship, that is Renaissance Merchant Bank. The fact that the bank is under curatorship does not mean that every other institution needs to be under curatorship.
"Such kind of logic would be akin to suggesting that when one family is sick in a village or suburb it means that everyone else in that village is also sick.
"A multiplicity of 'experts' are doing more harm than good to the sector by offering their expertise regarding the sector, even going ahead of the governor to speculate on the action the governor will take after the expiry of the June 30 recapitalisation deadline," he said.
After the deadline, banks will be given two weeks within which to update their management accounts as at the end of June and to declare their capitalisation and liquidity positions.
Based on the information, the RBZ would then conduct onsite verification audits on all institutions individually to confirm actual levels of capitalisation.
The governor stressed that capital adequacy was only one of the many facets of sound banking that the central bank was looking into. Such issues as corporate governance and shareholder structures would be assessed, particularly in the quarter to September 30.
"Given that capital adequacy is a necessary but not sufficient condition to guarantee financial sector stability, the Reserve Bank's on-site verification audits will also be focused on the important areas of liquidity conditions, asset quality, management quality, risk management and control environment as well as ownership structures and overall corporate governance systems at each institution," said Dr Gono.
These verification audits would be completed before September 30 after which corrective measures would be taken where necessary.
"As regulator, the Reserve Bank will institute swift corrective measures where necessary in defence of the interests of depositors and the economy in general," said Dr Gono
In a briefing on the state of the banking sector in Harare yesterday, Dr Gono dismissed statements by a multiplicity of "experts" on bank closures and other such fears as un-founded. He also took a swipe at the International Monetary Fund for its report early this month that stated that the banking sector was in trouble.
"But who is the IMF? I am the central bank governor here. The IMF comes here for two or three days and they have the guts and confidence to give comments about the banking system?
"I call that abuse of the pulpit. Simply because they have the economic pulpit from which to make comments on countries and sectors . . . that does not make them saints at all. If they were, they would not have gone through the receding economic meltdown which started in their own backyard.
"Only those with limited exposure and depth will swallow hook, line and sinker what the IMF said.
"They are mere human beings and economists but we have intimate knowledge of the sector. I know where Gokwe is, I know where Dotito or Bulawayo is, but all they do is come and sit in hotels and make comments."
Dr Gono said it was unfortunate that such institutions as the IMF sought to speak authoritatively on issues they did not have much information about.
He challenged Zimbabweans to be wary of such statements.
"As Zimbabweans, we must begin to have confidence in ourselves and realise that we are on our own. If one had a doctor, in this case the IMF, who makes prescriptions after prescriptions each time he visits without delivering anything to the table what would you do? In my book I would fire the doctor," said the charged RBZ chief.
Dr Gono assured the public that there was no need to panic. Over the past few weeks, there have been reports of some banks that were said to be on the brink of collapse due to failure to meet the recapitalisation deadline.
Commercial banks are expected to increase their capital bases to US$12,5 million while merchant banks need US$10 million. Building societies are expected to have US$7,5 million by tomorrow.
Dr Gono stressed the deadline would not be extended.
The central bank chief said information at hand and results from on-site and off-site periodic checks showed that all was well.
"Generally the banking sector is safe and sound notwithstanding that over the last four weeks we put one institution under curatorship, that is Renaissance Merchant Bank. The fact that the bank is under curatorship does not mean that every other institution needs to be under curatorship.
"Such kind of logic would be akin to suggesting that when one family is sick in a village or suburb it means that everyone else in that village is also sick.
"A multiplicity of 'experts' are doing more harm than good to the sector by offering their expertise regarding the sector, even going ahead of the governor to speculate on the action the governor will take after the expiry of the June 30 recapitalisation deadline," he said.
After the deadline, banks will be given two weeks within which to update their management accounts as at the end of June and to declare their capitalisation and liquidity positions.
Based on the information, the RBZ would then conduct onsite verification audits on all institutions individually to confirm actual levels of capitalisation.
The governor stressed that capital adequacy was only one of the many facets of sound banking that the central bank was looking into. Such issues as corporate governance and shareholder structures would be assessed, particularly in the quarter to September 30.
"Given that capital adequacy is a necessary but not sufficient condition to guarantee financial sector stability, the Reserve Bank's on-site verification audits will also be focused on the important areas of liquidity conditions, asset quality, management quality, risk management and control environment as well as ownership structures and overall corporate governance systems at each institution," said Dr Gono.
These verification audits would be completed before September 30 after which corrective measures would be taken where necessary.
"As regulator, the Reserve Bank will institute swift corrective measures where necessary in defence of the interests of depositors and the economy in general," said Dr Gono
Source - Byo24News
