This comes at a time banks are facing problems in processing Real Time Gross Settlement (RTGS) system while others have placed a cap on withdrawals, raising fears of a cash crunch reminiscent of the hyperinflationary era.
There were also fears of a run on deposits on financial institutions that are under-capitalised and have to submit recapitalisation proposals to the central bank by Tuesday.
The Zimbabwe Allied Banking Group, Royal and Genesis have to submit recapitalisation proposals to the Reserve Bank of Zimbabwe (RBZ) or face de-registration in the final call for banks to be capital compliant.
In its recommendations on the liquidity situation, BAZ says banks with excess funds should deposit that with the central bank against the issuance of negotiable certificates of deposit (NCDs).
NCDs are documents issued by banks promising to pay a depositor a specific amount of money in return for making a deposit for a time frame not greater than one year.
They carry a coupon rate to be determined by the central bank and when banks are in short of liquidity, they can always sell back the NCDs to the RBZ.It said that banks with low loan to deposit ratios are depositing their excess funds in their overseas correspondent bank nostro accounts.
“As a result, these funds are not available for on lending in the local economy. There is an urgent need for these funds to be brought back,” it said.The recommendation, if adopted, will pile pressure on foreign-owned banks that have been accused of deliberately starving the market of liquidity by having low loan to deposit ratios.
At least US$400 million is in bank’s accounts with foreign banks. In his monetary policy statement last month, RBZ governor Gideon Gono said banks should release some of the money banked offshore to improve the liquidity situation.
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He said while some banks are facing liquidity challenges others are sitting on huge balances on their RTGS or nostro accounts. BAZ also want government to resume the issuance of Treasury Bills (TBs) as a tool to smoothen its cash flows, within the cash budgeting framework by anticipating monthly collections by the fiscus.
TBs are short-term securities purchased for a price that is less than their face value. When they mature, the government pays the holder the full face value.
In a normal economy, all banks work in unison, making it possible for the financial system in the country to operate efficiently.
Banks with excess liquidity assist those in deficit positions using TBs as security. In addition, the central bank, as lender of last resort, accommodates banks in deficit by offering them overnight funds secured by TBs.
In the event that there is excess liquidity in the market, the central bank mops up the funds through the issuance of TBs. When there is a shortage of liquidity, the RBZ can buy back the TBs.
Finance minister Tendai Biti announced recently that RBZ will be converting the US$83 million it owes banks in statutory reserves into a tradable paper that can be used as security to borrow money.
But analysts say it is not evident that this tradable paper is backed by real funds. They are not convinced the stronger banks would see this as an incentive to re-enter the interbank market.
Zimbabwe’s liquidity situation has been compounded by the absence of lines of credit from multilateral institutions. As a result, the country has to rely on bank deposits, which is not enough, as most deposits are short-term.
Local banks most vulnerable: Analysts
analysts say banks with the highest market shares in deposits and the lowest loan-to-deposit ratios are better placed to weather the storm. “This would favour the international banks (Barclays, Stanbic and Standard Chartered) over the local players.
Those banks with high non-performing loans (NPL), lower NPL coverage, high loan-to-deposit ratios and low deposit market shares are undoubtedly the most vulnerable, in our opinion,” Renaissance Capital (RenCap) said in its macroeconomic update for Zimbabwe.
