THE Reserve Bank of Zimbabwe (RBZ) has cancelled the operating license of AfrAsia Bank Zimbabwe, formerly Kingdom Bank, after determining that it was no longer in a sound financial position.
The bank, a subsidiary of Mauritius-based AfrAsia Bank Limited (ABL), was placed under increased central bank monitoring last year as its core capital position weakened.
In a notice yesterday, the registrar of banking Institutions said the public was advised that the central bank had cancelled AfrAsia Bank Zimbabwe Limited’s licence in terms of section 14(4) of the Banking Act (Chapter 24:20).
“The cancellation followed board resolutions by AfrAsia Zimbabwe Holdings Limited (the shareholder) and AfrAsia Bank Zimbabwe Limited (the bank) to voluntarily surrender the banking licence,” reads part of the statement.
“The registrar has determined that the banking institution is no longer in a safe and sound condition in that the institution is grossly undercapitalised and is facing chronic liquidity challenges.
“All efforts by the shareholders to recapitalise the institution in order to comply with the minimum capital requirements have failed.
“The Reserve Bank has, accordingly, applied for the liquidation of the institution in terms of Section 57 of the Banking Act.”
In addition, the central bank said the board of directors advised that ABL was constrained in providing any further support to its Zimbabwe operations.
“In view thereof, the registrar has determined that cancellation of the licence is in the best interests of the institution’s depositors, creditors and members,” the central bank said.
RBZ said the public was advised that negotiations were at an advanced stage for the acquisition of Microking Finance (Pvt) Ltd, a part of AfrAsia, by a potential investor.
“In the meantime, the microfinance institution shall, however, be closed in order to protect the group’s assets,” the statement said.
“The public is further advised that AfrAsia Bank Zimbabwe Limited was a contributory institution with the Deposit Protection Corporation.
“In the premises, all small depositors will be paid in line with the Deposit Protection Corporation Act (Chapter 24:29).”
Early this month, it announced delayed financial results for the full year to June last year showing reduced losses from $20 million in the 18 months to June 2013 to $5,2 million.
In December last year, the bank said it was on course to raise $15 million through borrowings to increase liquidity in the local operation and had hired local finance group, Imara Capital Finance to market its medium-term Secured Note to secure the funds.
Recently it was reported that the bank was reducing working hours for workers by half.
The closure of AfrAsia comes barely a month after Allied Bank, which was bought by Transport minister Obert Mpofu’s family business in 2012, surrendered its operating licence and is now on course for liquidation.