BANKS continue to struggle to maintain their liquidity. The situation is now worse with some banks showing signs that they are sinking into the red. Business Editor, Shakeman Mugari, looks at
some of the banks and their positions in detail.
THE Reserve Bank of Zimbabwe (RBZ) has appointed Camelsa Chartered Accountants (Camelsa) to conduct an investigation into Kingdom Bank’s liquidity crisis. Kingdom has been experiencing a liquidity crunch for the past three months after it invested depositors’ funds in shares and other illiquid investments.
On January 21 the bank failed to pay statutory reserves of $3,38 trillion to the central bank. It also owes $3,5 trillion to the RBZ under the overnight accommodation.
On January 22 the bank made a payment of $315,3 billion and lodged security worth $2,7 trillion towards meeting their statutory reserve obligations. On the same day the bank ordered $4,35 trillion from the central bank but was only able to fund $1,05 trillion due to liquidity problems.
The bank’s crisis worsened on January 23 when it closed the day with a liquidity deficit of $17 trillion. The bank is also struggling to pay its debts to other financial institutions.
As of Wednesday last week, it owed a total of $6,35 trillion to other banks which include Beverley ($1,5 trillion), POSB ($1,3t), Cabs ($1,1t), Stanbic ($523b), Highveld ($518 billion), Intermarket ($952 billion), IDBZ ($353 billion), Metropolitan ($29,7 billion) and NMB ($20 billion).
Kingdom was unable to provide enough security for these loans and only managed to get half of the amount required. The amount that the bank owes to the ten financial institutions does not include its unpaid $12 trillion loan to CBZ. The bank also has $23,3 trillion in investments and securities.
The government-owned bank is under investigation from the central bank and Camelsa to ascertain the level of the liquidity crisis.
The bank, established from the forced merger of Trust, Royal and Barbican in 2004, has been having liquidity problems for the past two months.
As of December 31, 2007, ZABG had $8 trillion (26% of assets) of its money locked up in investments and securities.
This has resulted in ZABG failing to pay statutory reserves to the central bank. Preliminary investigations reveal that on January 21 the bank failed to pay statutory reserves worthy $690 billion. ZABG also failed to service its overnight loan of $700 billion to the central bank.
The following day the bank requested $850 billion from the central bank but was only able to get $200 billion because of a serous lack of funding. This forced the bank to limit cash withdrawals to $100 million per individual instead of the stipulated maximum of $500 billion.
As of January 23 the bank had failed to pay inter-bank loans worthy $700,8 billion. It owes POSB ($420 billion), RBZ ($18 billion) and CABS ($261 billion). It also failed to effect RTGS payments worthy $6,24 trillion due to inadequate funding. Although on January 23 the bank had a total requirement of $2,9 trillion it only managed to get $1,05 trillion from the central bank because of a serious lack of funding. The bank has since written to the central bank asking for a bail out loan.
In their letter to the RBZ the bank promised to pay back the loan through the disposal of shares in Pearl Properties and ZPI Properties which they said were worth $3,6 trillion.
A local forensic auditing firm, BCA Consultants, is currently carrying out an investigation into the liquidity crisis at Barclays. The bank’s problems started well before Sunrise II.
Since then the bank has been failing to fund cash requisitions from the RBZ. On January 23 the bank ordered $2,3 trillion against an estimated requirement of $4,5 trillion. The bank’s average daily closing position deficit for the period January 14 to January 24 was about $5,2 trillion. This figure was on average 12,4% of the overall market shortage.
They requested $14 trillion under overnight accommodation but could only secure $9,6 trillion to due funding problems. Since December 18 the bank has been relying on inter-bank borrowings and its loans to other banks had ballooned to about $3,6 trillion by January 21 with the highest amount owing to CABS ($2,3 trillion).
The banks’ cost of funds has also been rising since October increasing from 17% to 43% by the end of December.
Genesis Merchant Bank
Genesis is also under investigation from Camelsa to ascertain the level of the merchant bank’s liquidity crisis. The bank has been failing to pay its statutory reserves. It owes the central bank $411 billion in statutory reserve funds. Genesis has also run out of security after its surrendered $1,2 trillion worth of treasury bills to secure a $700 billion loan from Kingdom.
Genesis used the money it borrowed from Kingdom to settle what it owed to the RBZ in statutory reserves. Even after paying its statutory reserves, the bank continued to experience serious liquidity problems. Last week, the bank owed a massive $4 trillion to other financial institutions. As of January 18 Genesis’ treasury bills worthy $4,67 trillion were encumbered. The bulk of the bank’s assets are non-performing and long term which means they cannot be immediately off loaded to cover the its precarious position.
It holds CFI and ZB shares which are understood to be worth 9,93% of its assets. About 9,14% of Genesis’ assets are in Baccosi funds while 22% is in treasury bills. As the crisis worsened the bank started offering high interest rates of as much as 1 100% to cover daily shortages.
This resulted in the bank recording losses of about $14 billion per day. Sources at Genesis said the bank did not have viable plans to come out of the crisis. There are fears that its problems could have a contagion effect on the whole banking sector.
Renaissance Merchant Bank
Like Genesis, Renaissance is also being investigated by Camelsa at the instigation of the RBZ. Camelsa’s main focus would be to investigate Renaissance’s involvement in the underwriting arrangements of Pearl Properties’ IPO.
They will also be required to find out why the bank is experiencing liquidity problems. On January 21 the bank was unable to pay its statutory reserves amounting to $100 billion. At that time the bank’s managers said they were failing to pay their statutory reserves because they are owed $700 billion by other institutions.
ZABG owed them $600 billion while Stanbic was yet to payback $174 billion they owed the Patterson Timba-controlled bank. As at January 14 the bank had negative liquidity gaps in all time bands averaging $3,7 trillion.
The securities company is also having liquidity problems. As at January 24, Tetrad had negative projected daily net cashflow positions for the period January 25 to February 1. Tetrad does not have enough treasury bills to cover its negative cashflow positions. The institution recorded a loss of $359,9 billion for the month of December.
KPMG Chartered Accountants were hired to investigate Metropolitan Bank. The bank has been largely depending on the central bank’s overnight accommodation and the inter-bank market to cover its positions. On January 22 the bank only managed to fund $400 billion out of their total cash requisition of $700 billion.
The government-owned bank has about 80% of its funds locked up in securities and investments. The RBZ has since hired KPMG to conduct an in-depth evaluation of the institution’s liquidity problems.
As of last week, out of the total cash requirement of $2,3 trillion the bank only managed to fund $1 trillion. The bank is also owed $2,7 trillion by 10 other institutions.
The institutions that owe POSB include IDBZ ($159 billion), Interfin ($513 billion), DCZ ($307 billion), Kingdom ($287 billion), ZABG ($10 billion), Beverley ($256 billion), Genesis ($57 billion), CABS ($440 billion), NMB ($520 billion) and Renaissance ($159 billion).
CBZ last week had about $17 trillion locked up in securities and investments. This translates to 21,57% of the bank’s balance sheet. The bank
has however managed to fund its cash requisitions from the central bank.
CABS had $17,8 trillion locked up in securities and investments. This translates to about 41% of its balance sheet. The bank has been struggling to clear long queue at its banking halls.
Beverley has been having serious liquidity problems for the past six weeks. On January 23 the building society made cash requisition of $1,6 trillion but later cancelled after it failed to fund the request.
Beverley also failed to fund its request of $3,17 trillion on January 22 because it could not get the funding. The CBZ-owned building society also owes about $1 trillion to other institutions. It owes Intermarket $512 billion, Barclays $200 billion and POSB $256 billion. It also has $5,6 trillion in securities and investments.
NMB has $6,4 trillion in securities and investments but has managed to fund its cash requisitions from the central bank.
The bank has $31 trillion in investments and securities. On January 23 about $14,6 trillion worthy of RTGS payment transactions were dishonoured due to lack of funding. Of the 999 RTGS transaction dihonoured about 347 belonged to Standard Chartered Bank. The bank has however been able to fund its cash requisition from the central bank.
Stanbic last week had about $17,6 trillion of its balance sheet in investments and securities. The bank has however been able to funds its cash requisitions from the central bank.
The society has been struggling to access cash from their banker ZB. On January 22 the society requested $1,2 trillion but only managed to get $500 billion from ZB Bank. The society has $1,3 trillion in securities and investments.