THE Reserve Bank of Zimbabwe has cancelled the banking licence for Trust Bank over allegations of abuse of depositors' funds and violation of the Banking Act.
This marks the second time in eight years that Trust Bank has lost its banking licence.
RBZ yesterday said Trust Bank was financially unsound and was not operating in line with sound administrative and accounting practices and procedures.
"In particular, the bank is critically undercapitalised with core capital of US$1.90 million, has been posting persistent loss (cumulative US$18m since inception).
"The institution has been facing critical liquidity challenges emanating from the poor loan book and the inadequate working capital and gross abuse of depositors funds."
Efforts at recapitalisation, the RBZ said, had all been futile and the bank was no longer safe and sound.
As such, the central bank said, maintaining Trust Bank's registration as a bank was no longer desirable in the interests of its depositors, members and creditors.
The licence was cancelled in terms of Section 14 of the Banking Act.
The central bank said Trust Bank failed to maintain a base of net assets of a nature and amount sufficient to safeguard its creditors.
In terms of RBZ's phased regulatory capital thresholds, commercial banks are required to have US$75 million at hand by end of this month (December 2013) and US$100 million by June 2014.
Trust Bank, the RBZ found, could no longer maintain the prescribed minimum amounts of capital and reserves, while it was also accused of engaging in undesirable methods of conducting business.
"As a consequence of the said cancellation, Trust Bank is no longer a banking institution, as defined in the Banking Act, and therefore its status is that of a company registered in terms of the Companies Act (Chapter 24:03)."
The central bank said in conjunction with the Deposit Protection Corporation, it will institute liquidation procedures to facilitate payments to depositors and creditors.
RBZ said it was left with no choice, but to revoke the licence after efforts at resolving issues around abuse of depositors' funds failed.
This is the second time Trust Bank's licence has been cancelled following a similar decision in 2005 after it was found that the financial institution had engaged in imprudent banking practices.
Only last week, Trust Bank's parent company, Trust Holdings Limited, was delisted after the financial services group had failed to meet continuing obligations.
THL had failed to produce quarterly shareholder updates, financial statements for the year to December 2012, the 2012 annual report and pay 2013 sustenance fees in line with listing rules of the Zimbabwe Stock Exchange.