DEPOSITORS this week said they were losing confidence in the banking sector following a spate of frauds and robberies since last year.
Depositors interviewed said they feared that events which occurred between 2003 and 2004 that resulted in the closure of 15 financial institutions as a result of fraud and failure to practice proper banking could be back to haunt the sector again.
“We are still sceptical about the local financial sector. Its explains why many people withdraw all their money once it is deposited in their accounts,” said one depositor.
The Bankers Association of Zimbabwe could not give a position regarding confidence in the banking sector this week when asked to comment.
“It is going to be difficult to attract a lot of deposits when all this is happening. The banks are battling to regain our confidence,” another depositor said.
Tobacco farmers this week said they were against the depositing of their payments in bank accounts as a result of the recent spate of frauds and robberies.
The farmers are being paid US$2 000 on the spot for tobacco sold and the reset is deposited in their bank accounts.
“Why should the government decide how much money to pay us at hand and say the balance will be deposited in our accounts to promote local banks instead of tightening their operations to avoid fraud and robberies? What if we lose our money?” questioned one tobacco farmer.
Reserve Bank governor Gideon Gono is on record suggesting that some banks are being run in a mafia-style management.
Globally, banks have been accused of causing the credit crisis in 2007 which eventually plunged the world economy into a recession.
Since then several banks have closed, some were taken over by stronger ones while others are slowly recuperating under government bailouts.
While local banks have not been directly affected by the credit crisis, their performance is not impressive as they are failing to offer credit to business and individuals.
The current loan-to-deposit ratio of 40% is considered low.
As core functions, banks take deposits and lend the money to generate profits through interest.
Financial institutions make money by skilfully managing the risk of transforming short term deposits into long-term loans.
“Until the deposits improve and the lender of last resort is restored, many banks will not be able to increase their loan-to-deposit ratios above 40%. As such, banks will continue to be viewed as unsupportive to industry, which may not be entirely true,” an analyst said.
Another sad reality is that most banks are technically insolvent with no paid up capital. Revaluation reserves, which are not distributable, are only what most banks have as shareholder’s funds.
In the event of huge default on their loans such banks will not be able to absorb the shock because they are already over leveraged. Mindful of this shortcoming, banks are understandably limiting their loans to manageable levels with credit being provided only to stronger companies.
According to information gleaned from various financial institutions, most local banks’ internal auditing systems were said to be weak to such an extent that they can be manipulated, putting depositors money at risk.
Bankers also said fraud can take long to detect or control as it usually involves senior managers. Robberies are also said to be done with information from “someone inside.”
Some bankers are said to be stealing from suspense accounts, while some monitor whether accounts are active or dormant so as to abuse them.
“Tempering with suspense accounts has always been practiced in this country especially during the era of the burning phenomenon. It is now a thorny issue because we are now dealing with real money (US dollars),” a commercial bank insider said.
However before dollarisation in 2008 NMBZ Bank lost about US$4 million. A case of insider fraud also resulted in CFX Bank going insolvent.
Incidents of fraud and robberies that have occurred at Zimbabwean banks since January last year:
- January 2009: three armed men storm the CBZ Chitungwiza branch and steal mobile phones from bank staff, but fail to get any cash.
- February 2009: Four armed men among them two policemen hit Kingdom Bank’s Karigamombe Centre branch in central Harare and get away with US$120 000, R48 930, £155, 1800 pula and 10 Australian dollars. Closed circuit televisions help apprehend the suspects.
- July 2009: A Barclays Bank branch in Bulawayo falls victim when a six-member gang raided the branch and escaped with US$50 000, R126 000 and £500.
- December 2009: Six armed robbers hit Stanbic Bank’s Chegutu branch making-off with US$266 000 150 000 Rand and 34 690 Pula before escaping in two getaway cars –– an Isuzu KB twin-cab truck and a Peugeot 406. An assistant branch manager is shot and injured as the gang of six flees the scene with boxes containing cash denominated in US dollars, South African rands and Botswana pulas. Customers who are in the banking hall are also relieved of their cash, mobile phones and other valuables.
- January 2010: Investigations at FBC Bank unearth a massive US$1 million fraud at its Mutare branch. The bank says it has established that it has lost US$500 000. Junior workers defrauded the bank in collusion with senior managers and most of the suspects have since been arrested. The fraud was discovered when the bank was carrying out month-end reports for January, and the accounts would not balance. The employees made fictitious deposits to three accounts they had opened to facilitate the fraud and would withdraw the money, then deposit it again into the personal accounts of accomplices. This unique fraud occurrs because both junior and some identified senior staff were acting in collusion; hence the dual control system was compromised.
- February 2010 the Zimbabwe Allied Banking Group (ZABG) is defrauded of US$140 000, involving one of the bank employees, working in collusion with some individuals outside the bank.
Paul Nyakazeya