Business Reporter
RESERVE Bank of Zimbabwe Governor Dr Gideon Gono has blamed the high incidence of losses experienced by some banks on low capital bases. Dr Gono’s remarks were based on a study of the

banks’ profitability over the 12 months to June 30 this year.
This also follows the Bankers’ Association of Zimbabwe’s appeal for a reduction of recently hiked bank minimum capital thresholds.

About half of the 15 banking local institutions analysed recorded losses amounting to US$9 million in the full year to June 2011.

Dr Gono also blasted the smaller banks’ alleged surreptitious manoeuvres to block his recent directive to increase minimum capital levels by up to 900 percent.
“Banking institutions with higher capital levels, such as CBZ Bank and Standard Chartered Bank, revealed demonstrable ability to generate revenue in excess of the operating costs,” he said.

“Banking institutions with low capital levels, such as Royal Bank and ZABG, as well as those with illiquid capital such as Agribank and Trust, have higher incidence of reporting losses.”
Dr Gono said low capital restricted the banking institutions’ capacity to underwrite sufficient business and generate enough revenue to meet their routine operational expenses.

Addressing bankers following a letter of appeal from the BAZ for a downward revision of minimum capital levels, Dr Gono said banks with higher capital had greater loss absorption capacity and resilience to shocks.
But BAZ president Mr George Guvamatanga disowned the letter of appeal, signed by his deputy, Agribank chief executive Mr Sam Malaba, saying the association was still consulting on the issue of increased minimum capital thresholds.

“The letter was never authorised nor signed by me as president of BAZ, nor any view of the majority of BAZ,” said Mr Guvamatanga.
Minimum capital levels for commercial banks and merchant banks were raised from US$12,5 million and US$10 million, respectively, to US$100 million for both categories.

The RBZ raised minimum capital levels for building societies from US$10 million to US$80 million, discount and finance houses from US$7,5 million to US$60 million and US$5 million from US$1 million for asset management firms.
Dr Gono said the revised minimum capital thresholds would stay, as there was a positive link between profitability, bank charges, interest rates, liquidity, higher capital levels, confidence in the banks and level of credit extension. Each class of banking business is expected to have met 25 percent compliance by December this year, 50 percent by June 2013, 75 percent by December 2013 and 100 percent by June 2014.

According to the RBZ, Trust Bank suffered US$2,19 million loss, Agribank US$2,42 million, ZABG US$1,2 million, Royal US$690 000 and Interfin US$80 million in June this year. Most banks controlled by foreign shareholders and with higher capital levels have posted profits over the period under review.
Against this backdrop, Dr Gono last week blasted some members of BAZ for trying to influence politicians to block the increase in minimum capital levels to ensure stable banks.

“It is very strange that the very people who are supposed to be strengthened are crying foul. Are we going to wait for outsiders (IMF) to tell us to strengthen ourselves?” asked Dr Gono.

The letter signed by BAZ vice-president Mr Malaba and copied to the Office of the President and Cabinet and Ministry of Finance implored the RBZ for a revision of minimum capital levels to US$20 million for commercial banks by December this year.
The letter warned of the negative consequences to the economy and the banking sector if the new capital thresholds were not reduced.