TRUST Holdings’ banking subsidiary, Trust Bank, has been placed under provisional liquidation after shareholders withdrew court papers opposing liquidation of the bank.
This comes about nine months after the Deposit Protection Board initially announced it was instituting liquidation procedures following cancellation of its licence by the Reserve Bank of Zimbabwe in December last year due to a weak capital position and abuse of depositors’ funds.
But Trust successfully opposed the liquidation arguing that the institution was on the verge of concluding a recapitalisation agreement with an unnamed South African investor.
Trust also questioned the logic of the central banks’ push for the bank’s liquidation when it was clear that the lender of last resort was itself insolvent and had to be saved by legislative intervention otherwise it would have ceased to exist. It further stated that Trust’s operations were severely hampered by the RBZ’s “unlawful” decision to sale its assets to Allied Bank at the height of the banking crisis in 2003.
The provisional liquidation order was with effect from October 20 and will run for the next six months to allow the bank to conclude its recapitalisation with the SA investor.
“They have used the term provisional liquidation because Trust bank’s licence was revoked,” said one source who requested not to be named.
“Technically, it is a form of curatorship, because the bank was given a six months ultimatum to recapitalise of which failure to do so within that period will result in the bank winding up.”
DPB chief executive Mr John Chikura confirmed the development yesterday.
“I can confirm that the provisional liquidation order was granted. It is a normal liquidation process,” he said.
In December last year, the central bank cancelled the banking licence for Trust Bank over allegations of abuse of depositors’ funds and violation of the Banking
Act. This was for the second time in eight years that Trust Bank has lost its banking licence.
The bank was financially unsound and was not operating in line with sound administrative and accounting practices and procedures.
In particular, the bank was critically undercapitalised with core capital of $1,9 million and had been posting persistent loss.
Prior to the cancellation of its licence by the central bank, the institution had been facing critical liquidity challenges emanating from the poor loan book and the inadequate working capital and gross abuse of depositors funds.
No comment could be obtained from Mr William Nyemba by the time of going to print yesterday.