Golden Sibanda Senior Business Reporter
The three tier system for bank capitalisation introduced by the Reserve Bank is a progressive and important strategy representing a departure from the “One size fits all approach”, the Bankers Association of Zimbabwe has said. BAZ president Mr Sam Malaba said the three tier capitalisation system allows banks to play a complementary and symbiotic role for growth.“RBZ is placing the onus on shareholders of banks to decide on the type of banking institution they want to become and then work towards the corresponding level of capitalisation by 2020,” he said.
This means banks wishing to offer a more diverse range of banking and financial services and foreign banking institutions will naturally work towards $100 million capitalisation by 2020.
Mr Malaba made the remarks when commenting on RBZ governor Dr Mangudya’s maiden monetary policy statement released last week.
Tier 2 banks offering banking services only will remain at $25 million level of capitalisation threshold by 2020, the central bank’s deadline for the new regulatory minimum capital requirements.
Tier 3 banks, essentially micro-finance banks, will be deposit taking institutions, but offering limited banking services. The capitalisation levels for such have been set at $7,5 million by 2020.
“This is a very good development because; every banking and financial institution has a role to play in the economy, to contribute towards growth of the economy,” the BAZ president said.
He said the economy was characterised by different segments requiring a diverse range of banking and financial products and services.
Mr Malaba said the capitalisation of a banking entity will be defined by the magnitude of risks associated with its banking business and the range of products and services it is willing to offer.
He commended the governor for introducing a special purpose vehicle to take bad loans from banks saying this would improve financial intermediation and credit availability in the banking sector.
“Banks are currently weighed down and saddled by NPLs in excess of $700 million. The SPV will enable banks to create capacity for new lending, hence ameliorating the current liquidity challenges facing the economy for the benefit of the productive sectors,” he said.
Related to the issue of the SPV will be the setting up of a credit bureau to reduce information asymmetry between banking institutions and enhance overall viability of banks through effective vetting of borrowers.
BAZ also hailed the RBZ’s plans to import coins, demonetize Zimbabwe dollar balances, the planned importation of coins, revival of interbank and reiteration that the multi-currency will continue.
The banks’ lobby group said it supported the governor’s position on the need to expedite the issuance of bankable and transferable 99 year leases to qualifying farmers.
“This will unlock financial resources to those farmers who have bankable projects.”
BAZ expressed its support for RBZ advocacy in terms of gazetting of sector specific investment regulations and guidelines and defining clear empowerment credits for compliance with the indigenisation and economic empowerment policy. This was a key prerequisite for purposes of attracting investment.
Commended by BAZ was also the reduction in individual currency threshold to $5 000 from $10 000; quarterly meetings with the BAZ on banking sector issues; promotion early remittances of export receipts; and measures in respect of Nostro balances abroad.