The report alleges that there was siphoning of depositors’ funds through related party loans to the main shareholders and their associates “akin to a declaration of dividends by shareholders from depositor’ funds”.
RBZ combed at ReNaissance Merchant Bank (RMB) last month to ascertain the financial position of the bank including its profitability, liquidity and solvency status.
This was after Indian businessman Jayesh Shah blew the whistle on Timba when the RFHL founder failed to repay a loan borrowed to meet RMB’s minimum capital requirements. The RBZ report accused Timba and Kundishora of operating as de facto executive directors and signatories of the bank with the board in the dark of activities at the bank.
“Meanwhile the board of RMB was not well-versed with the condition of the bank, including the extent and impact of RFHL exposure, and sources of funds used to recapitalise the bank,” reads part of the report.
The report accuses the bank of deliberately using a Special Purpose Vehicle, ReNaissance Trading, to circumvent regulations and engage in non-core activities including gold, grain and fuel trading, contrary to Section 34 of the Banking Act.
It also noted that there was a high credit risk at RMB “as evidenced by a high level of non- performing loans of 38% of the total loan book of US$53,1 million as at March 31 2011”.
It further said that total insider borrowings of US$12,4 million which “include exposure to RFHL, Mr Timba and his relatives exceeded 25% of the bank’s capital base in violation of Section 16(2)(a) of the Banking Regulations (S.I 205 of 2000).
The report blasted the bank for abusing depositors’ funds.
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“The investigation revealed significant abuse of depositors’ funds by Mr Timba through debiting of an unfunded RFHL call account held at RMB. “The RFHL call account had an unauthorised overdrawn balance of US$9,8 million as at April 21 2010 against an expired limit of US$750 000,” the report said.
“On several instances Mr Timba, RFHL and Bethel Trust converted to their own use deposits negotiated and received by RMB as part of the bank’s money market operations.”
These activities, the report said, precipitated liquidity challenges in the bank.
As of Tuesday, the bank’s unsettled maturities amounted to US$11 135 453,59.
The report said internal controls at the bank had virtually collapsed with transactions being done without authorisation from both the managing director and finance director.
The duo refused to append their signatures on some of the transactions but they proceeded nonetheless.
“Notwithstanding refusal by RMB’s managing director and finance director to authorise (via appending signatures) payments from an overdrawn RFHL call account, the entries continued to be processed by treasury back office without any authorisation,” it said.
It accuses Timba and group accountant, Tatenda Madzingo of giving instructions directly to senior manager Treasury Operations Norest Kwete without the involvement of the bank’s senior management.
“The head of internal audit, Mr Shepherd Muzivi failed to discharge his statutory obligations of upholding the efficacy of internal checks and balances within the group,” the report said.
RFHL shareholding structure, the report said, was hindering effective regulation and supervision as “it has facilitated owner-managers of RMB to masquerade as non-executive directors”.
In terms of the Banking Regulations, the shareholding of an individual and his or her related interest in the bank is limited to 25%.
However, individuals can increase their shareholding subject to approval from the central bank.
The report said Timba’s direct and indirect interest was 44, 66% held by PF Timba (7%), Bethel Trust (36,88%) and Munotidaishe Trust (0,78%). Kundishora’s direct and indirect shareholding amounts to 24, 24% held through D Kundishora (9,75%) and Dunca Trust (14,49%).
If the 9,13% shareholding of Clementine Sibve in RFHL is taken into account, the report said, the effective shareholding of the three founding members and major shareholders would be at 78,03%.
Collectively, executive management owns about 89,17% of the institution, while non-executive directors control a further 0,17% of the group’s shareholding.
“The group’s shareholding structure camouflages the true identity of the beneficiary shareholders and has militated against the adoption of sound risk management and good corporate governance practices,” the report said.
