Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has ordered banks to settle transactions outside the public glare as he cracks the whip on the sector amid revelations some banks were refusing clients to withdraw cash from their foreign currency accounts (FCAs).
Over the past months, banks have been telling customers that they can only withdraw money if a cash deposit has been made into their accounts.
This has forced customers to liquidate their FCA balances into local currency as the money would have been stuck in their accounts.
“Financial integrity means that banks settle transactions outside the public glare. Don’t contaminate banking with politics,” Mangudya told a post-budget meeting this week.
“You do not need to settle offshore. It is settled domestically but given value as a back office transaction. Settlement is not a negotiating tactic where a customer of a bank is told that there is no money. That is not banking.”
Mangudya said the cash is there in the bank, the “money is in the nostro”.
Statistics from RBZ showed banks were holding FCA balances of nearly US$1bn as at October 31, made up of cash at bank (US$393,265,049) and nostro balances of US$573,101,628.
In the same period last year total FCA balances were US$725,645,136 made up of cash at the bank (US$155,247,214) and nostro balances of US$570,397,922.
Bankers who spoke to Business Times said there has been a divide in the banking in which the international banks would prefer to do settlement among themselves.
Company executives said they have been struggling to use money in their FCAs as banks gave all sorts of excuses.
The settlement gridlock has seen some buying the money in the FCAs for a 10% fee.
It also comes as ethanol producer GreenFuel has told customers to make physical cash deposits into its account or a transfer accompanied by a letter that value transferred to its accounts would be honoured.
In a letter to customers, GreenFuel said its bankers were refusing to honour “our payments as they are insisting that we should get value first from your respective banks that would have processed transfers” to its accounts at Ecobank, CBZ and BancABC.
“Going forward, please note that we will not release product unless a cash deposit is done to our accounts in physical cash or the transfer is accompanied by a letter from your bankers that value has been transferred to our bank and they can honour the payments,” wrote GreenFuel’s Percy Daka in a letter dated August 14.
Bankers who spoke to Business Times said the central bank “didn’t think properly on the domestic nostro. It was complicated by civil servants and this is why they wanted their money,” the banker said.
The banker said RBZ needs to scrap the “domestic FCA” and the banking sector remains with a nostro funded by US$.
The banker said there was rigidity within the sector to the extent that plans to have a civil servants’ card collapsed as some institutions did not buy into the idea despite having a large branch network and having a huge chunk of the civil servants as customers.
“International banks appear to have been told by their head office not to do domestic settlement. The market is not homogenous.
There are local banks sitting on one side and international banks sitting on the other side. The solution is to go back to the old system where nostro was nostro,” the banker said.
Repeated efforts to get comment from the Bankers Association of Zimbabwe were fruitless. Questions sent a month ago have not been responded to by the time of going to print.