THE RESERVE Bank of Zimbabwe (RBZ) has extended the deadline for banking institutions to comply with the $100 million minimum capital thresholds to December 2020 from the initial deadline of June this year, a move expected to relieve pressure on the troubled financial sector in the country.
According to the monetary statement announced by acting RBZ governor Charity Dhliwayo on Wednesday, bankers would have to comply with the capital thresholds by December 31 2020.
“Against the background of attendant challenges in the macroeconomic environment and in conformity to the minister’s pronouncement in the 2014 national budget statement to maintain the current levels of banks’ capitalisation, the RBZ hereby affirms that capital levels will remain as per the thresholds obtaining in December 2012,” she said.
Dhliwayo said capital requirements would remain at current levels of $25 million for commercial banks, $25 million for merchant banks, $20 million for building societies, $15 million for discount and finance houses and $5 million for microfinance banks.
Dhliwayo said all banking institutions would be required to submit to the central bank comprehensive recapitalisation plans to meet the new deadline by June 30.
The Bankers’ Association of Zimbabwe had ahead of the monitory policy statement called on RBZ to review the on-going capitalisation exercise of banks as well as reduce the minimum threshold for on-lending to the country’s small-to-medium enterprises due to liquidity constraints besetting the economy.
The central bank also announced that it will resume its banker to the government role with effect from March 31 when it will host the government exchequer account as well as restoring the lender-of-last-resort facility.
“The lender-of-last-resort facility implies that an overnight accommodation rate will be announced by March 31 2014 and becomes applicable for the facility. The overnight accommodation rate will be the anchor interest rate that will act as a benchmark for market rates,” added Dhliwayo.
The banking sector remains saddled by a plethora of challenges.
The total banking deposits closed 2013 at $4,7 billion while loans and advances were at $3,7 billion, the central bank said.
As at May 2013, total deposits stood at $3,7 billion down from $4,2 billion during the first quarter of 2013 due to liquidity constraints.
In her monitory policy statement, Dhliwayo said the loans to deposit ratio increased from 37,33% in June 2009 to 78,29% as at December 31 2013, adding that the bulk of the deposits were short-term in nature which has constrained the banking sector’s potential to provide effective financial intermediation to productive sectors of the economy.
“The tenor of lending has remained confined to the short-term at a time when the productive sectors require long-term funding for retooling.”
Individuals constituted the bulk of lending distribution at 23,8%, a reflection of attendant macroeconomic challenges.
Economic analyst John Robertson, however, said the monitory policy was not clear on the problems of currently bedevelling the banking sector.
“The monitory policy came and found us in the dark and left us in the dark,” Robertson said.
”There are no statistics provided to show where the banking sector is at the moment, it was just mentioning what everyone knows.”