Financial Gazette (Harare)
22 November 2008
Harare — BANKS were this week still digesting the full impact of the Reserve Bank of Zimbabwe (RBZ)'s directive compelling them to maintain their minimum capital requirements in foreign currency.
Previously, the central bank had allowed the sector to maintain minimum capital levels in Zimbabwe dollars calculated at the grossly undervalued interbank exchange rate.
It was therefore not difficult for most banks to mobilise enough resources needed to comply with the RBZ's capital requirements until last week when the terms were changed.
Bankers Association of Zimbabwe (BAZ) president, John Mangudya, said financial institutions were still locked in crucial consultations over the latest directive.
"We are still consulting as BAZ on the new guidelines," Mangudya said. "It will be premature for me at this time to talk about this because we are (still) consulting," added the BAZ boss.
Analysts said the new requirement might open a new era of bank takeovers, mergers, rights issues and private placements as weaker players move to comply with the RBZ rules.
The sector has already witnessed entry by renowned foreign banks namely Loita Capital and the International Finance Corporation, which have bought into Metropolitan Bank and ABC Bank respectively.
The Reserve Bank has maintained a firm grip on the sector to avert systemic risk that might put depositors in danger.
Last week the RBZ directed that banks' minimum capital thresholds must be equivalent of the United State dollar as follows; Commercial banks US$12,5 million from US$10 million, merchant banks and building societies US$10 million from US$7,5 million, finance and discount houses US$7,5 million, asset management companies, US$2,5 million and micro finance institutions US$5 000.
These capital thresholds were previously computed at the prevailing interbank exchange rate, which is lower than both the parallel market exchange rate and the Old Mutual Implied Rate.
Infinity Asset Management this week said the RBZ's statement was not very clear though whether it has to be strictly US$ balances or even other assets whose value in US dollars can be objectively established. Said Infinity: "Our view is that it cannot strictly be the former as certainly very few financial institutions would be in a position to satisfy that given the business they handle is predominantly Zimbabwe dollar denominated."
Some analysts however, said they did not anticipate serious challenges in meeting the minimum capital thresholds as banks had already kept their capital levels well above the central bank requirements.
"The exchange rate is unstable and banks were kept looking for more funds to meet the requirements," said an analyst."But if the thresholds are kept in foreign currency it makes it easier for them. I do not see any challenges because most banks had much more money in their reserves than the required, they have enough resources to meet the capital requirements," he said.
But now, the banks have to compete on the illegal parallel market to purchase the foreign currency with the rest of the market where the hard currency is not only expensive but also severely scarce.
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