Financial Gazette (Harare)
25 January 2006
editorial
Harare — THERE has not been the proverbial calm since the banking sector touched off a financial storm that brought with it anguish, nightmares and bitterness among a multitude of the victims of the stupefyingly complex pattern of deceit and criminality in the sector.
With the sector noticeably shaken in the aftermath of the tremor, close to 10 financial institutions were subsequently placed under curatorship to protect depositors' funds and ring-fence trouble spots, thus putting paid to systemic risk.
But the Reserve Bank of Zimbabwe -- which instead of throwing the drowning banks both ends of the rope, kept them on a life support system through the Troubled Banks Fund -- literally walked into a legal minefield. Corruption-accused bankers alleging victimisation sought recourse to the courts amid all sorts of innuendo and far-fetched allegations which bordered on the absurd and ludicrous such as that the governor was trying to keep a lid on the scandal's political dimension.
Thus a cloud was placed against the central bank and its integrity over how it handled the banking sector crisis. Even after giving the institutions a new lease of life through a shotgun marriage of the troubled banks which culminated in the birth of the Zimbabwe Allied Banking Group -- meant to make the best out of a bad situation -- the central bank still came in for a lot of flak from the banks suffering a liquidity crunch and numerous other compliance weaknesses.
The major problem was that those caught on the wrong side of the monetary regulations took advantage of the fact that the RBZ had not taken heed of free advice to make public, in footnote detail, which banks were experiencing a liquidity crunch and why, their capital inadequacies and other compliance weaknesses, imprudent practices and frauds. Or what measures were taken before each bank was placed under curatorship, how many times the banking authorities met the affected banks to consider escape options and how many corrective orders the central bank gave each of these institutions. Understandably, the RBZ might have wanted the veil drawn over these issues given the sensitive nature of banking but it is now counting the cost. The RBZ must with hindsight be regretting its decision not to tell all. It is easy to be smarter after the fact.
We warned in our editorial of April 1, 2004 that if the monetary authorities maintained their unwise position that they would not throw stones from the pulpit despite the brickbats they were getting themselves, the cloud might get darker before it started raining with opprobrium for the RBZ, which controls the country's financial levers. The devil is not ashamed of running away with the Bible!
This is why we came out strongly in support of the RBZ when it advocated a judicial inquiry into the unfolding banking crisis after its decisions to place some of the banks under curatorship raised a hue and cry from bankers whose institutions were sitting on shifting sands.
And just as well the central bank has gone beyond rhetoric and has now constituted an independent panel to make an in-depth inquiry and assessment of the entirety of what transpired in the institutions concerned, leading to the curatorships and eventual amalgamation into ZABG. The panel comprises international experts on corporate governance, former central bank governors from the region, retired High Court judges, business persons and legal practitioners.
This comes after two banks in particular, Trust and Royal, retained a determination in the courts that they appeal to the RBZ on their treatment by the curators (read RBZ). Without delving into the merits of the two cases, it is clear that the actions of the two institutions smack of disgruntlement over how their crises were handled. And therein lies not only the legal but also compelling moral basis for a judicial inquiry.
For the aggrieved parties such an independent panel will enable them to face up to the public and defend their honour and integrity. This is exactly what they are asking for through their actions and hopefully it will not be a case of turkeys voting for an early Christmas! For the central bank the panel will not only be the poniard with which to prick the bankers' bloated bladder of allegations and lies but will also help it put everything into a perspective which justifies its actions.
Most importantly though, the panel, whose members are most unlikely to be influenced by the prospect of future need or current obligations, will bring with it a measure of transparency to everything surrounding the banking sector crisis. We have no doubt that they are best suited to impartially gather facts, interview both sides and pronounce undiluted empirical findings to the satisfaction of all concerned. This is the only way to put this niggling issue to rest once and for all.
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