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7 banks under RBZ probe

Shakeman Mugari



THE Reserve Bank of Zimbabwe (RBZ) has put seven banks under intensive investigation to establish the root cause of their liquidity crisis. Three financi

al auditing firms have been appointed to investigate the banks in a situation which sources say is akin to the curatorships of 2004.


The central bank has hired Camelsa Chartered Accountants to probe Kingdom Bank, Zimbabwe Allied Banking Group (ZABG), Renaissance Merchant Bank and Genesis Merchant Bank.


Auditing firm KPMG has been appointed to investigate Metropolitan Bank and the People’s Own Savings Bank (POSB). Barclays Bank’s books are being scrutinised by BCA, a local forensic auditing firm.


BCA recently concluded an investigation into the affairs of NMB Bank which lost US$6,2 million in a fraud case involving officials in the treasury department.


Although the liquidity crisis is a sector-wide problem, the seven banks are the worst hit. Their balance sheets are seriously misaligned making it difficult for them to meet their cash obligations to depositors. Zimbabwe’s financial sector has been experiencing liquidity problems for the past three months. This is the third such crisis in five years.


In 2004 three banks —Trust, Royal and Barbican — went under because of liquidity problems. A dozen other asset management companies and financial houses also collapsed.


Central bank sources said the external auditors’ roles will be to investigate the liquidity crisis at the banks and find solutions to the problems.


The appointment of the external auditors is part of the central bank’s effort to rein in on errant banks which it accuses of investing depositors’ funds into shares and foreign currency resulting in the cash crisis.


The central bank has since directed financial institutions to restructure their balance sheet to ensure that they are able to meet their cash requirements. This comes as it emerged last week that almost all banks have trillions of dollars stuck in investments and securities. An average of 26% of banks’ assets are in investments which include shares, properties and foreign currency.


The RBZ has increased unsecured accommodation rates to discourage banks from borrowing from the central bank to cover their short positions.


Any amount borrowed on secured overnight loan facility in excess of $1t will carry an interest rate of 1200% instead of the normal rate of 975%.


The RBZ will also be strict on banks that want to roll-over loans provided under the accommodation window. The source said the RBZ has also directed all bank chief executives to issue signed copies of weekly compliance certifications. The certificates will be submitted to Gono every week. In each certificate a chief executive must certify that their bank has not violated exchange control regulations in the preceding week.


They must also officially state that their bank has not violated anti-money laundering laws.


The banks will also be required to carry out weekly audits on their corporate and individual customers to monitor any suspicious transactions between accounts.


An audit of the bank’s employees must also be done to certify that each one of them is fit to continue handling depositors’ funds. A chief executive must also endorse that their bank has fully complied with statutory reserve payments and that the financial institution is not using depositors’ funds for speculative purposes.


A chief executive who issues a certificate containing false information will be deemed unfit to run the bank, the source said. They will be asked to step down so that the bank’s operating licence can be speared. The certificate is meant to insure that bank bosses have full responsibility over their financial institutions.


Other conditions include that any request for overnight accommodation should be accompanied by a comprehensive letter from the chief executive of the bank detailing how the institute fell into a short position in the first place.


The report should be submitted to the central bank governor who now has the sole authority to decide on whether a bank gets overnight accommodation or not.


The monitoring system will centre on banks’ assets and liabilities and cash deployment strategies. Financial institutions whose balance sheets are skewed towards non-core activities like properties, shares and foreign currency will not be allowed to borrow from the central bank to cover their positions.


The central bank also plans to evaluate the Automated Teller Machines (ATMs) of all banks to establish whether they have been reconfigured to dispense high denominations which were introduced two weeks ago.


Most banks have not reconfigured their ATMs.


The RBZ also wants banks to install generators in their banking halls as a contingent plan against the persistent power cuts. External auditors will also be required to check if banks have proper disaster recovery plans and business continuity arrangements. Sources in the banking sector said Gono told bankers this week that all excess liquidity on settlements shall be locked-up in zero coupon bills of up to seven day instead of the previous 270 days. The central bank will also introduce 91-day treasury bills whose interest rate of return will reflect market liquidity conditions.

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