7 March 2014

Zimbabwe: 'Court Case Won't Stop Compensaton'

THE Deposit Protection Corporation is to reimbursing depositors of Trust Bank which was closed by the Reserve Bank of Zimbabwe (RBZ) despite the arcrimonious wrangle between the bank and RBZ.

The RBZ cancelled Trust Bank's operating licence, accusing the institution of abusing depositors' funds.

RBZ said Trust was unsound and not operating according to sound administrative and accounting practices and procedures.

The institution was undercapitalised with a core capital of US$1,90 million and has been posting persistent losses since inception, amounting to US$18,01 million, the RBZ said.

Trust has gone to court to fight against the cancellation of its banking licence, arguing that the closure has not been procedural.

DPC CEO John Chikura said they will continue to reimburse depositors regardless of the ongoing court case.

"The process of going to court doesn't stop us from reimbursing depositors," Chikura said.

"As far as we are concerned the inconvenience of depositors is what we do not want."

He revealed that some Trust Bank depositors had received compensation from the bank. The corporation gives a minimum deposit cover of US$500.

About 90% of Trust Bank depositors should be reimbursed in full as 3 111 of them have deposit balances of less than US$500, he said.

Chikura said the process of reimbursing those with more than US$500 dollars deposited in the bank would have been quicker had it not been for the ongoing court case.

He also revealed that most banks have paid their contributions into the Deposit Protection Fund for the first quarter ending 31 December last year.

In his 2014 national budget, Finance minister Patrick Chinamasa reduced contributions by the banks from 0,3% to 0,2% of total deposits without fixing a cap.

"The banks' payment to the fund is good as it gives us some liquidity. If banks are not doing well we can mobilise resources to help depositors," Chikura said.

He said the corporation welcomed the proposal by the central bank, in the Monetary Policy Statement presentation by acting governor Charity Dhliwayo in January, to establish a commercial court.

"We are very happy with this proposal as it will ease the current congestion in the courts," Chikura said.

He revealed that the DPC were working with the central bank to establish the court describing it as a "work in progress".

Chikura said they had paid about 60% of depositors of the defunct Genesis Bank, while depositors of defunct Royal Bank are still trickling in for reimbursment.

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