Early this year, the Bank of Tanzania (BoT), in its supervisory role, closed down five banks due to unduly low capitalisation, directed the merger of three other banks, and tackled head-on a protracted, viral non-performing loans syndrome. All these were crises-in-the-making that threatened to wreak havoc in the country's banking subsector in particular, and the financial sector in general.
This - in our humble view - is ample testimony to a central bank that is on top of things in performing its mandated obligations. But, this is not to say that the actions taken by BoT have put paid to the woes in Tanzania's banking system; far from that.
According to the International Monetary Fund's Financial System Stability Assessment (FSSA) released on December 6th this year, 11 banks (representing 12.8 per cent of banking assets) risk undercapitalisation "between 2018 and 2020" - and another 22 banks (32 per cent of banking assets) harbor a 'tail-risk' syndrome of undercapitalisation.
There is more of that hair-raising stuff in the IMF report, as we detailed yesterday. Indeed, we concur with the Fund's call to strengthen BoT's banking supervision activities. In this regard, the Bretton Woods institution advised the central bank to boost staffing in the critical Banking Supervision Department.
It's worrying that the BoT, according to the IMF report, has delayed filling 19 vacancies of key technical positions -- 10 of which are reportedly without people since 2015. This is despite the fact that the number of banks to be supervised has increased. How then can the central bank effectively and timely detect danger with such a huge staffing gap?
Also, if the raft of proposals by IMF - one of Tanzania's premier development partners - are implemented, this could elevate banking and the economy to the next higher level of quality and sustainability.