THE National Social Security Authority (NSSA) board investment committee meets on Thursday to deliberate on the recommendations on how the pension fund could capitalise its banking associates and subsidiary.
REPORT BY NDAMU SANDU
Commercial and merchant banks are supposed to have US$50 million as minimum equity capital by June 30, US$75 million by December 31 and US$100 million by June 30 next year.
The minimum capital levels are part of reforms by the central bank to build strong banking institutions.
The recommendations to be discussed on Thursday were made by Deloitte & Touche engaged by NSSA to find out from its associate companies and subsidiary how they would comply with the minimum equity capital thresholds.
NSSA’s shareholdings in banks include a 26% in FBC Holdings (the owner of FBC Bank), has 40% in FBC Building Society, 37,9% in ZB Financial Holdings (the parent company of ZB Bank Limited) and 84% in Capital Bank Corporation.
It also holds a 11,6% stake in CBZ Holdings, the proprietors of CBZ Bank Limited.
NSSA general manager, James Matiza told Standardbusiness last week that Thursday’s meeting would deliberate on Deloitte & Touche’s report which they can either consider or reject.
The committee’s recommendations would then be presented to the authority’s full board meeting next month.
NSSA’s proposed recapitalisation plans had caused anxiety among other shareholders who felt they had not been consulted.
Matiza said, as a shareholder, NSSA had the right “to determine the future of its proposed investments”.
NSSA has come out in favour of bank mergers after saying that it has no money to give to all the banks.
However, bank mergers have to be agreed to by all shareholders.
FBC Building Society, in which NSSA has a 40% stake, has US$18,97 million against the required US$20 million. ZB Building Society has US$14,56 million.
In his monetary policy statement last month, Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono said the two institutions had made significant progress towards compliance alongside three others.
Capital Bank is in a fix in that it has US$7,50 million against the required equity capital of US$25 million.
Gono said Capital Bank’s recapitalisation plan needed further refinements to render it credible.
A NSSA board member last week said the authority’s proposal was either convert Capital Bank into a microfinance bank or merge it with one of NSSA’s associate banking companies.
The board member said merging all the banking units required the consent of all the shareholders.
“In ZB and Capital, NSSA and government have control but this is different in FBC Holdings and we hope the other shareholders will buy into NSSA vision,” the board member said.
What does bank capital represent?
Bank capital represents the resources contributed by shareholders towards the establishment of the bank and its working capital requirements. It represents a permanent commitment by a bank’s shareholders. Bank capital represents the net worth of a bank, that is, the difference between the value of the bank’s assets and its liabilities.
Gono has in the past said that banking institutions with higher capital levels, such as CBZ Bank and Standard Chartered Bank, revealed demonstrable ability to generate revenues in excess of their operating costs.
“A low capital base restricts a banking institution’s capacity to underwrite sufficient business and generate enough revenues to meet its operational costs,” Gono said.
Gono said the higher the capital base, the greater the loss absorption capacity and therefore the resilience of the institution to adverse endogenous and exogenous shocks.