Tamisai Makombe
Last week’s drastic and prescriptive action by the Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono to raise minimum capital requirements for banking institutions appears from the outside like a move that is going to set the pace for a more robust banking system, hopefully, one devoid of any bank failures. However, the directive in itself, despite its good intentions, will sadly prompt more bank closures by so doing inflict more discomfort to an already miffed banking public.
As a simpleton, I am not convinced totally that the course of action is a master stroke or a watershed in so as far as bank failures are concerned. After all, we have had situations in the past where the RBZ has dipped its hands in such funds. I am one of those who think the RBZ is partly, if not entirely responsible for this nemesis.
Depositors do not want bank closures. So the RBZ as the regulator of banks ought to adopt a proactive, prevention is better than cure approach as the opposed to the reactionary, eleventh hour approach they have been using towards banking crises.
As far as I know, the central bank houses two whole departments of Banking Supervision and Surveillance and Money Laundering. What purpose are these two departments serving if they cannot detect problems in their benign stages and nip them in the bud, to save the depositors from the resultant anguish caused by bank closures?
In his own words, the beloved Governor of RBZ says people should not play the blame game but instead be constructive in their criticisms. Whether he likes it or not, people are naturally going to be blamed or judged, if they sleep on their jobs and do not do that which they are expected to do but at the end of the day claim fat pay cheques for it.
To help the banking public, I humbly suggest that the RBZ or anybody else mandated with protection of depositors funds introduce bank rating services which look at things such as bank’s strength, business model and exposure to various risks in the same way hotels are rated in the hospitality industry with the safest banks getting a 5-star rating. Rating services are not in themselves an absolute guarantee of bank safety but at least they help depositors make informed decisions.
In other more developed economies, one of the powerful safeguards against bank closures is deposit insurance. I am not sure if this is the same model being used by the local Deposit Protection Corporation (DPC). If it is then, the DPC needs to explain to the public convincingly why it cannot reimburse affected depositors beyond a measly US$150. Where the deposit insurance concept is practised, depositors are protected by a deposit insurance body should their banks go belly-up and draw down their money from this creation up to limits of well over US$100 000 depending on the economy.
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The deposit insurance body is funded not by taxpayers or depositors but by an insurance fund contributed to, from premiums paid by insured banks.
I disengage from this article with a tingle. Seeing that indigenous banks are the ones falling victim to bank failures, does it still make sense then to weaken the foreign owned banks by bastardising or for want of a better word, adulterating them with 51% local ownership content?
