Bank closures: DPC pays out $2,6 million

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THE DPC has so far paid out $2,6 million to 9 495 depositors of six banks that were closed since 2012 .

THE Deposit Protection Corporation (DPC) has so far paid out $2,6 million to 9 495 depositors of six banks that were closed since 2012 and says it is lobbying for a separate insolvency regime or additional legal provisions for banks.

BY VICTORIA MTOMBA

DPC chief executive officer John Chikura said the depositors that benefitted were from Royal, Trust, Genesis, Allied, Interfin and AfrAsia banks.

“Since inception, a total of 12 977 depositors have benefitted from the deposit protection scheme. Between 2004 and 2006, DPC paid out a total of Z$11,6 million to depositors of Sagit Finance House, Century and Rapid Discount Houses. While from 2012 to date DPC has paid out about $2,6 million to depositors of Royal, Trust, Genesis, Allied, Interfin and AfrAsia Banks,” Chikura said.

The closed banks had the common ailments — undercapitalisation, poor corporate governance, insider non-performing loans and abuse of depositors’ funds akin to declaration of dividend to shareholders. Chikura said there were material deficiencies in the current problem bank resolution framework against attainment of finality and speedy resolution of failing or failed institutions.

“DPC together with the Reserve Bank of Zimbabwe is currently lobbying for the review of banking legislation so that it has a separate insolvency regime or additional legal provisions for banks. The attainment of finality and quick resolution of problem banks will provide the banking public with prompt access to their funds in the event of bank failure. This will ultimately enhance public confidence in the banking system,” he said.

Government is working on amendments to the Banking Act which bars individuals from owning more than 10% shareholding in a banking institution. The amendments will create civil and criminal liability for abuse of depositors’ funds, negligence or reckless conduct of banking business and for breach of statutory duties of directors and senior managers of banking institutions.

Chikura said capitalising the fund would assist in increasing public confidence in the financial system, which is essential for economic prosperity.

He said the fund was engaging all relevant stakeholders with a view to restore the premium rate to the previous level of 0,3% of eligible deposits instead of the current 0,2%. He said a review of contributions to sustainable levels would benefit the depositors and the banking sector.

Last month, DPC said it had put seven banks under its watchlist as at May 31. Four of them were in a distressed financial condition, that is, had Camels ratings of “4” or “5”.

Camels is a rating system for banks where regulators look at capital adequacy, asset quality, management quality, earnings, liquidity and sensitivity to market risks. DPC’s total exposure to banks on the watchlist was $39,4 million and exposure to distressed contributory institutions stood at $21,7 million.

DPC was established on July 1 2003.

Zimbabwe has 18 banking institutions made up of 13 commercial banks, three building societies and one merchant bank.

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