The Reserve Bank of Zimbabwe (RBZ) has given troubled banks a June deadline to shape up or ship out as it moves to bolster the banking sector.
In a first review of the Staff Monitored Programme on Zimbabwe, the International Monetary Fund (IMF) said Zimbabwe had taken steps to clear the banking sector of distressed financial institutions and had given a June deadline for two remaining undercapitalised banks to comply with the requirements.
“The RBZ continues to closely monitor the remaining two troubled banks, including meeting with shareholders and boards on the banks’ recapitalisation strategies. However, the RBZ plans to rid the system of all distressed banks by end-June 2015,” IMF said.
In his January monetary policy statement, central bank chief John Mangudya said the sector had three distressed banks — MetBank, AfrAsia Bank and Tetrad.
AfrAsia surrendered its banking licence at the end of January after failing to recapitalise.
Tetrad is currently under provisional judicial management and cannot take deposits and issue out loans. Mangudya said MetBank management and shareholders had embarked on various fund mobilisation strategies in order to pay outstanding liabilities.
“To date, most of the small depositors with balances of $10 000 or less have been fully reimbursed. Further, Metbank shareholders are currently negotiating with a foreign prospective shareholder who is expected to infuse fresh capital to compliment other business strategies the bank is pursuing to stabilise and spur the bank to full recovery,” Mangudya said in January.
IMF said risks to the financial system had been reduced after the RBZ placed three troubled banks into liquidation, resulting in a marked decline in the level of non-performing loans.
In his January monetary policy statement, Mangudya said 13 out of the 19 operating banks had complied with the minimum capital requirements as at December 31 2014.
“Going forward, boards and senior management of banking institutions are expected to work in close collaboration with the shareholders in order to meet the banks’ own interim capital growth targets. In this regard, there is need for intermediate annual targets that banking institutions should achieve,” Mangudya said.
IMF said the reform agenda in the banking sector had moved substantially saying although there were key steps towards reducing the NPLs, getting the Zimbabwe Asset Management Company (Zamco) to operate “in accordance to best practices can help to further reduce the NPLs’ burden”.
It said the move should improve confidence in the banking sector and make it easier to extend credit to the private sector.
“A sound financial system needs a strong supervisor; thus, staff welcomes the progress in recapitalising the RBZ,” IMF said.
Last year, the ministry of Finance and Economic Development provided the RBZ with $100 million GDP in securities for its recapitalisation. As at the end of last year, $311 million in government securities were issued for the takeover of RBZ noncore debt.