RBZ comes hard on bank shareholders

SHAREHOLDERS at financial institutions that have failed to meet new minimum capital requirements will forgo dividends until their firms comply with the central bank's directives, the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said yesterday.

The State-run AFC Commercial Bank, together with Nedbank Zimbabwe, CBZ Building Society, National Building Society and ZB Bank failed to meet the US$30 million benchmark by December 2021 as prescribed by the RBZ.

According to a monetary policy statement released yesterday, these financial institutions will not be permitted to pay dividends without prior approval by the central bank.

The RBZ wants them to submit revised board-approved capitalisation roadmaps, along with quarterly updates on their initiatives.

Some have already submitted their plans, but it appears the RBZ was determined to make sure the plans are implemented, and has set a compliance deadline of December 2022.

"Banks and deposit-taking microfinance institutions that failed to comply with the minimum capital requirements as at December 31, 2021 shall: a) not be permitted to pay dividends without prior approval of the central bank until such a time they have met the new minimum capital requirements; and b) be required to immediately submit to the bank revised board approved capital plans and quarterly updates on capital raising initiatives," the RBZ said.

The RBZ said AFC was granted extension for compliance to December 2022 while Nedbank was required to comply by the end of June. Last week, Zimbabwe's biggest banking group CBZ Holdings Limited, said it was set to merge its major units to comply.

It said it would merge its flagship commercial banking unit, CBZ Bank Limited and CBZ Building Society.

The banking group has applied for approval from Finance minister Mthuli Ncube.

The proposed transaction comes at a time when CBZ is seeking to create a domestic and regional multi-asset class business in the financial services sector.

The RBZ said NBS was granted an extension to comply by the end of next month, while ZB Bank, will merge with ZB Building Society.

The banking sector, Mangudya said, remained adequately capitalised, with average capital adequacy and tier one ratios of 32,86% and 26,54%, respectively, above the regulatory minima of 12% and 8%, respectively.

The aggregate core capital increased by 59,11% from $63,39 billion as at September 30, 2021 to $100,83 billion as at December 31, 2021.

In January 2020, the RBZ increased minimum capital requirements for the various classes of banking institutions as part of measures to promote the resilience of the financial sector.

He said the banking institutions bolstered their capital positions through organic growth including recapitalisation of revaluation gains on investment properties as well as capital injection by shareholders.

The RBZ said it was confident that the remaining institutions would meet their minimum capital requirements by December 31 2022.

Mangudya said the banking sector asset quality also remained satisfactory with the average non-performing loans to total loan ratio of 0,94% as at December 31, 2021, against an acceptable international benchmark of 5%.

Total banking sector loans and advances increased by 61% from $142,79 billion as at June 30, 2021 to $229,94 billion as at December 31, 2021, largely attributed to the translation of foreign currency denominated loans.