Failed banks creditors in fix

Creditors of six failed banks that are under final liquidation remain in a fix as the banks' liabilities far outweigh their cumulative assets, figures show.

Latest figures from the Deposit Protection Corporation show that the six banks - Genesis, Royal, Trust, Interfin, Allied and AfrAsia - have total liabilities amounting to $284 million against combined assets of $93,4 million.

As of December 31, 2018, DPC had made recoveries of $49,3 million for the banks in question, all in final liquidation.

Speaking at the DPC's inaugural annual general meeting in the capital on Tuesday, chief executive officer Vusi Vuma said the Corporation had adopted an aggressive recovery strategy last year, whereby in addition to cash, it started accepting payment by way of treasury bills and immovable assets. Of the six banks, AfrAsia has a net liability position of $21 million with total liabilities amounting to $61 million.

Its total assets were worth $39 million as at December 2018 and DPC recovered $15,3 million. Cumulatively, AfrAsia's creditors have been paid $4,8 million whilst preferred creditors have been paid $3,5 million.

Interfin Bank's net liabilities stood at $119,9 million with total assets of $24,3 million, far below the total liabilities valued at $144,2 million.

According to DPC, cumulatively, about $1,7 million has been paid out as dividend to the bank's preferred creditors while concurrent creditors were paid $3,6 million. About $7,2 million was paid to a secured creditor, the National Social Security Authority (NSSA) in the form of properties.

At Trust bank, cumulatively, about $1,5 million has been paid to preferred creditors with concurrent creditors paid $3,2 million. Earlier, DPC indicated that due to the magnitude of the net liabilities for the failed banks, the Corporation was resorting to suing directors of these failed financial institutions to help recover funds for payouts to creditors and depositors.

In light of this, after completion of a forensic audit at Trust Bank, DPC instituted action against its eight directors claiming payment of $24,3 million being prejudice suffered by depositors as well as creditors and the matter is still pending before the High Court.

The DPC commenced operations on July 1, 2003, as an independent statutory body established by Government to administer the Deposit Protection Scheme. As an integral component of an effective financial safety net, a deposit protection scheme enhances consumer protection by providing explicit protection to depositors in the event of bank insolvency.

A couple of Zimbabwean banks have folded in the past two decades due to mismanagement among other key reasons. Since its formation in 2003, the DPC has compensated depositors of nine failed banking institutions which were subjected to liquidation and these are Century Discount House, Rapid Discount House, Sagit Finance House, Genesis, Royal, Interfin, Trust Bank Corporation, Allied and Afrasia banks.

However, there are other financial institutions that made their own resolution arrangements outside the ambit of the DPC and these are National Discount House, High Veld, Inter-market bank, Inter-market Discount House and the original Trust, Royal and Barbican banks whose assets were sold to Zimbabwe Allied Banking Group (ZABG) in 2005.

Meanwhile, DPC's total income jumped 39 percent to $21 million for the 2018 financial year with a $17 million surplus compared to $11,6 million reported in the prior year. Total assets grew 35 percent to $63 million from $43 million in the comparable year. Fund balance closed the year at $60 million representing a growth of 40 percent, but still below the target of 2 percent of total deposits.