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Golden Sibanda : Senior Business Reporter

The new Banking Act came into effect on Friday last week, giving the Reserve Bank of Zimbabwe more latitude to tighten bank supervision, monitoring and control while diluting controlling individual or bank holding shareholder influence on banks. The new legislation also affects other Acts apart from the Banking Act. It amends the Reserve Bank of Zimbabwe Act, Deposit Protection Corporation Act, Reserve Bank of Zimbabwe (Debt Assumption) Act, which was passed only last year and repeals the Troubled Financial Institutions (Resolution) regulations.

Part of provisions of the amended Banking Act now prohibit individuals or corporate bodies from holding more than 25 percent of voting shares in banks or their holding companies.

The latest restrictions or conditions relating to shareholding in banks or bank holding entities seek to curtail risks associated with owner managed banks or institutions, which in the past resulted in prejudice of depositors or investors’ funds.

Cases that come to mind in this respect include Renaissance Merchant Bank, Royal Bank, Time Bank, Interfin Bank, Trust Bank and AfrAsia, whose failure was strongly linked to alleged lack of proper or adequate oversight and impropriety stemming from single shareholders’ excessive influence. In the past, individuals or bank holding companies in Zimbabwe were allowed to own up to 100 percent of the shares or the voting rights in the banks or bank holding companies. Individuals or corporates may only be allowed to hold over 25 percent of shares in a bank or bank holding company if they get approval from the registrar of banks following special evaluation.

The new banking Act will also prohibit the acquisition of shares of a banking institution or controlling company; or the voting rights of members of a banking institution or controlling company; which exceeds five percent or more of the total share capital or voting rights of members, as the case may be, of the banking institution or controlling company.

Further, “No person shall knowingly acquire a significant interest in a banking institution or controlling company; banking institution or controlling company shall permit any one person to acquire a significant interest in it; unless the Registrar, by written notice to the person and the banking institution or controlling company concerned, has given permission for the acquisition,” the amended Banking Act says.