2 August 2012

Zimbabwe: FBC Bank Goes for Merger

FBC Holdings intends to merge its banking division with the building society in a bid to meet the new minimum capital requirements announced by the Reserve Bank of Zimbabwe this week. According to FBCH senior officials, its flagship subsidiary FBC Bank and FBC Building Society will be merged into a single entity, FBC Bank.

This follows the increase of minimum capital thresholds for the banking institutions by up to 900 percent by the RBZ in efforts to stabilise the financial system.

Yesterday, FBCH spokesperson Ms Priscilla Sado- mba confirmed the plan.

RBZ Gvernor Dr Gideon Gono said on Tuesday commercial banks would be required to have minimum capital of US$100 million, up from US$12,5 million.

Merchant banks would be required to have a minimum capital of US$100 million, up from US$10 million.

Capital levels for building societies were raised from US$10 million to US$80 million, finance and discount houses from US$7,5 million to US$60 million and US$1 million to US$5 million for micro-finance houses.

The banks will be required to be fully compliant by June 20 2014 but should meet the 25 percent of the new capital levels by the end of this year.

They will be further required to be 50 percent and 75 percent compliant by June 30 and December 31 next year.

FBCH sources said the bank's capital as at June 31 stood at US$30 million while the building society had a capital base of US$16 million. If the two are amalgamated, this gives US$46 million capital base for the merged entity.

While the bank capital level would have been in line with the December 31, 2012 threshold, the building society needed an injection of US$4 million.

"At US$46 million, it means the merged entity will have exceeded the US$25 million required by the end of this year," said one source familiar with the plan.

"This also means the bank will need just US$4 million to meet US$50 million capital required by June 30, 2013."

But the financial services group is also forecasting to generate profits this year which will be invested in capitalising the merged entity.

In addition, the group has proposed to sell its 58 percent equity in Turnall Holdings. At least US$20 million would be raised from the sale on the current trading price on the Zimbabwe Stock Exchange.

The group hopes to sell the stake by December next year. Dr Gono said increasing the minimum capital levels was critical to ensure a stable financial system in line with the global trends.

He said the increase in minimum capital levels for banking institutions had been necessitated by the dynamic nature of the financial landscape, regulatory requirements, increase in competition and economic uncertainties, which have placed unprecedented pressure on banks to be adequately capitalised.

He said every banking institution whose minimum paid up capital does not comply with the respective prescribed levels will be required to submit a detailed recapitalisation plan by September this year.

Dr Gono insisted there would be no extension to the deadlines and urged institutions that fail to comply to either merge operations or be acquired by financially stronger entities.

Barclays Bank yesterday said it would submit its plan to the central bank.

In a statement, the bank said it would continue "to operate within the confines of the legal and regulatory framework of the country".

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