HomeBusinessDeposits flight hits indigenous banks

Deposits flight hits indigenous banks

RMB was put under curatorship in June after a Reserve Bank of Zimbabwe (RBZ) investigation unearthed financial transgression where founding shareholders abused depositors’ funds.

RBZ governor Gideon Gono said in his monetary policy statement that US$1,2 billion had left the locally-owned banks to mostly foreign-owned banks and this had affected lending to the productive sectors.

“The flight of deposits, which is estimated around US$1,2 billion has created a liquidity challenge, mostly at the indigenous banks which have, however, been at the forefront of lending to the productive sectors of the economy,” Gono said.

Locally-owned banks have taken the lead in lending to the productive sectors while the foreign- owned banks have adopted a cautious approach.

Statistics from RBZ show that loan to deposit ratios of local banks stood at 80% as at June 10 compared to 66% for the foreign-owned banks.

The developments at RMB came at a time confidence in the banking sector was on the increase as evidenced by a rise in deposits to US$2,9 billion in June from US$2,3 billion in December last year.

The problems at RMB, which caught RBZ unawares, sent depositors scurrying after having money trapped in banks during the 2003-2004 banking crisis.
Analysts say by publishing the capital position of banks, RBZ would inadvertently trigger a flight of deposits from banks that are yet to comply with the capital threshold to those that have surpassed the requirements.

Gono gave three banks —Kingdom, Royal and  ZABG — more time to raise the capital while turning the heat on Genesis, Ecobank and RMB, which is under curatorship.

Ecobank said on Thursday it has already met the requirements while Genesis is yet to inform the market on its recapitalisation plans.

RMB’s fate lies in the curator, Reggie Saruchera, who would determine the next course of action by the end of December.

There are 26 operating banking institutions made up of 17 commercial banks, four merchant banks, four building societies and one savings bank.

There are 16 asset management companies and 132 microfinance institutions.

Recent Posts

Stories you will enjoy

Recommended reading