By our staff RESERVE Bank of Zimbabwe (RBZ) governor, Gideon Gono, warned on Friday the implementation of the law targeting foreign-owned banks should be carried out in a manner that preserves confidence to avoid grinding the economy to a halt. In his remarks at the congress of the Confederation of Zimbabwe Industries (CZI) in Nyanga, Gono said: “The implementation of Indigenisation and Economic Empowerment regulations in the banking sector should be done in a manner that preserves confidence since any adverse developments in the banking sector could grind economic activity to a screeching halt.”
Gono’s remarks came on a day an indigenous bank, Royal Bank, surrendered its banking licence as it was making losses due to under-capitalisation.
Last month, Genesis surrendered its banking licence after failing to meet the US$10 million minimum capital threshold required of a merchant bank, while Interfin was placed under curatorship for corporate governance deficiencies, reinforcing the idea that foreign-owned banks should not be tampered with. Gono and Youth Development, Indigenisation and Empowerment minister, Saviour Kasukuwere, clashed last month after the latter announced in the Government Gazette that foreign-owned banks had a year to comply with the empowerment laws.
Gono said RBZ was “gratified to note that some aspects of the Indigenisation and Economic Empowerment regulations are receiving attention with a view to harmonise and fine-tune pertinent issues”.
He said there would be amendments to the Banking Act, which seeks to “improve the legal and regulatory environment in the country, as well as tackle specific issues currently faced by banks such as abusing depositor’s funds through insider lending”.
He said the lack of liquidity in the banking sector “seriously undermines the stability of the financial system and results in the loss of confidence in the market”.
“It is against this background that liquidity is regarded as the life and blood of the economy and in its absence, financial markets cease to function efficiently.”
Zimbabwe has 23 financial institutions, of which seven are foreign-owned.
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