LIVINGSTONE MARUFU
The Reserve Bank of Zimbabwe (RBZ) is confident that non-compliant banks – Time Bank and ZB Building Society – will raise capital in order to meet the central bank’s minimum capital threshold by the end of this year.
FBC Holdings recently acquired Standard Chartered Bank Zimbabwe, another non-compliant bank. This will resolve the situation involving its non-compliance.
Under the current regulation, Tier 1 banks are required to meet a minimum capital requirements threshold of US$30m or ZWL$ equivalent while Tier 11 should have a capital threshold of US$20m including building societies.
RBZ governor John Mangudya (pictured) is confident the banks will meet the December 31, 2023 deadline.
“…The deadline for compliance with the minimum capital requirements by non-compliant banks was extended by a further 12 months to 31 December 2023, to allow for the completion of the recapitalisation processes.
“Banking institutions are employing a number of capital preservation strategies, which include investing in gold coins and investment properties, lending in United States dollars, as well as maintaining a portion of their capital in United States dollars,” Mangudya said.
According to Mangudya, the ZB Building Society’s capitalization is also dependent on how well the group’s current strategic initiatives turn out. The financial institution is considering merging its operations with ZB Bank in order to meet both of their capital requirements.
For Time Bank, Mangudya said: “In line with the approval to recommence banking business, Time Bank was permitted to gradually meet the prescribed minimum capital requirements in terms of its strategy which provides for a phased approach to conduct banking activities.”
RBZ continues to monitor capitalization of banking institutions, given that a well-capitalised banking sector is an engine for sustainable economic growth and development.
As at June 30 2023, 15 out of 18 banking institutions (excluding POSB) reported core capital levels that were above the minimum capital requirements.
Mangudya said as at June 30, 2023, the banking sector was adequately capitalised and all banking institutions were in compliance with the prescribed tier 1 and minimum capital adequacy ratios of 8% and 12%, respectively.
The average capital adequacy and tier 1 ratios were 40.48% and 35.35%, respectively and aggregate core capital increased to ZWL$5.05 trillion as at June 30 2023 from ZWL$611.11bn as at December 31 2022 .
The growth in core capital was mainly attributed to capitalisation of retained earnings.
The retained earnings for some banking institutions are largely composed of revaluation gains from investment properties and translation gains from foreign exchange-denominated assets.
Total banking sector assets increased to ZWL$27.28 trillion as at June 30 2023 from ZWL$3.81 trillion as at December 31 2022.
