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Zamco winds up operations

by Staff reporter
17 Jun 2022 at 08:14hrs | Views
THE Zimbabwe Asset Management Company (Zamco) is winding up operations after it paid off, last year, the $1,2 billion it received from the Government to acquire Non-Performing Loans (NPLs).

Zamco is an independent asset management company established by the Reserve Bank of Zimbabwe (RBZ) in 2014 to acquire NPLs from commercial banks' collaterised loan books to clean up their balance sheets.

The firm was established with the technical assistance of the International Monetary Fund (IMF) to not only to address the emerging crisis in the banking sector from NPLs.

At the time of its formation, the NPLs ratio had then risen 20,45 percent against the internationally acceptable threshold of 5 percent. As at December 31, 2021, the NPLs level had gone down to below 1 percent.

According to Zamco, NPLs are a drag on the performance of banking institutions through reduced earnings and loss of capital. It says a number of bank failures in Zimbabwe were a result of high levels of non-performing loans.

Saddled with high NPLs, banks were no longer keen to extend lending to the productive sectors of the economy, thereby affecting job creation and economic growth.

The NPLs acquisition cleaned up and strengthened banks' balance sheets and provided them with additional liquidity, which has enhanced their important financial intermediation role, including pooling savings and channelling them to productive economic activities.

The restructuring of non-performing loans also provided relief to borrowers whose fundamentals remained strong but required reasonable funding cost structure and appropriate loan repayment periods that could be accommodated in their cash flows.

Zamco, which was established in 2014 in terms of section 57A of the RBZ Act, is mandated to wind off operations within 10 years of establishment.

The firm's chief executive officer Dr Cosmas Kanhai said in an interview his organisation was in the process of winding up after achieving its mandate well ahead of the stipulated time frame.

"Basically, we have started the process of winding up.

"We have finished taking over loans (NPLs) and the mopping up exercise was not a continuous exercise, but it was done over a certain period of time up to 2018 and has been finished.

"The Reserve Bank Act says that on winding up, we render an account to the Reserve Bank, so what then is going to happen is once we have completed the winding up process, all remaining assets will then be rendered to the Reserve Bank," he said.

"Hopefully, this winding up process will be concluded in this second half of the year around September or October thereabout."

Zamco's strategy for funding the acquisition of NPLs comprised a number of initiatives including Government funding through long-term debt instruments that were approved in the 2015 national budget.

Last year, Dr Kanhai said, paid off all the Treasury Bills the asset management firm used to acquire the NPLs.

"So, what we have done is last year we paid off all the Treasury Bills that were used to acquire the $1,2 billion NPLs, which means there is no recourse to public funds and Zamco activity now.

"In fact, the Government has been paid off all the money and I think it makes sense to wind up because obviously when we render the accounts to the Reserve Bank, we won't be having any liability to the Government.

"As at December 31, 2021, it was 0,94 percent, I don't have the latest now because the figures are produced quarterly," he said.

Source - The Herald
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