(HERALD) RBZ gets tough on bank indiscipline

RBZ gets tough on bank indiscipline
By Victoria Ruzvidzo

FBC Bank was yesterday thrown out of the clearing house after it failed to honour cheques written by its customers to other banks worth about $4,9 sextillion, while some companies and individuals had their accounts frozen as the central bank turned the heat on those fuelling clandestine deals in the financial markets.

Banks meet twice daily at the clearing house to collect, exchange and settle cheques and electronic fund transfers. Therefore, FBC will now have to look for a willing bank through which it can conduct its settlement.

Yesterday RBZ Governor Dr Gideon Gono said the ejection of FBC would be followed by a targeted supervision to assess the bank’s overall solvency status and the competencies of its management and board of directors.

The central bank had turned down FBC’s application for $4,9 sextillion because "the central bank cannot be used to fund fraudulent activities".

With effect from today, the central bank would no longer give unsecured accommodation to any bank while those with security would need to present proof of the genuineness of their requests, as Dr Gono warned that this time around, no bank would be put under curatorship but would have to close down if need be.

"Any bank that fails to secure its intended accommodation will be allowed to go under. As monetary authorities we no longer have the appetite for curatorships," he said in a no-holds-barred address to bankers, industrialists, Government officials and journalists who attended a briefing on the fraudulent activities in the financial markets.

Dr Gono had no kind words for the superintendents of the banking sector and the Zimbabwe Stock Exchange for failing to question abnormal transactions that were "obviously" fraudulent.

"We are going to use market instruments to deal with market indiscipline," said Dr Gono.

"In the case of FBC their applying for $4,9 hexillion (sextillion) means that they want me to print that money, but I will not subject the people of this country to the pain of me having to create that kind of liquidity."

He would not be moved by any force to change his stance.

"I know who the FBC shareholders are but anyone who fails to settle will be kicked out of the grouping. It does not matter which bank

you are. There are those who think they have shareholders in high places and can wave magic wands but for as long as I am governor, which I tend to be for a long time to come, it will not happen. We will not waste the taxpayers’ money."

Several companies including stockbroking firms EFE Securities and its directors, Lynton Edwards and its directors; Sweet Africa Enterprises, Seizler Enterprises and Hardon George, among others, were blacklisted and would not be allowed to open any bank accounts with effect from today.

Banks were immediately asked to comply with the directive and present proof to the central bank that they had done so.

Yesterday Dr Gono presented copies of bank cheques that had been fraudulently issued by several commercial banks and taken to the Zimbabwe Stock Exchange to purchase shares. In one instance, Stanbic Bank had issued a bank cheque for $22 sextillion payable to Premier Bank while in another case Sweet Africa Enterprises had on the same day secured three bank cheques from ZB Bank valued at $14 sextillion made out to EFE Securities.

In another case, CBZ’s Kaguvi Branch issued a bank cheque for $500 quintillion (18 zeros) on November 13 to a company called Personal Cars. The same branch also issued more such cheques.

It was revealed yesterday that between November 10 and 20 fraudulent cheques that were intercepted amounted to $60 sextillion which had been deployed on the stock exchange to bid up shares, while part of it had found its way onto the foreign currency parallel market.

This was artificial money which fuelled inflation, when in fact, there was $10 trillion in circulation currently.

Dr Gono said this reflected the epic proportions that indiscipline, corruption and underhand manipulation of money and capital markets had reached.

"As a nation, it is high time that we put a stop to these vices, as the victims are hardworking workers going for months without access to their salaries at banks; the sick and ill who cannot get treatment at hospitals and clinics due to lack of cash . . ."

The revelations had exposed the real culprits.

"For a long time now it has become fashionable to apportion blame to the Reserve Bank as the soft target. Many had expended energy and resources in a smear campaign against the central bank and Dr Gono in his personal capacity but the central bank chief said he remained undeterred.

"Vaye vari kuti (Gono) ngaaende tinoda kudemonstrator ngavauye tione. Ungaprinte mari kusvika kupi?" he said in reference to the demands for cash which he was criticised for failing to satisfy.

Flyers were also being distributed apportioning blame on him for the current economic challenges and other strategies were being employed to oust him.

On the financial sector Dr Gono castigated banks saying some of them had relapsed into the retrogressive mode of lax controls and risk management systems that led to some officials engaging in corrupt activities.

"What has happened to traditional banking? There is no bank that is not an accomplice to this kind of nonsense.

"Ndosaka takushevedzai vekuAttorney- General’s Office because vamwe vacho vari kunzi vabhadhare $10 million bailout chete."

Deputy AG Mr Johannes Tomana was present at yesterday’s meeting which was also attended by the Deputy Minister of Industry and International Trade, Cde Phineas Chihota, and his counterpart in the Ministry of Water and Infrastructural Development, Cde Walter Mzembi.

Dr Gono gave the floor to representatives from the banking sector, the ZSE and the Securities Commission to give their positions.

Bankers’ Association of Zimbabwe president Dr John Mangudya said the recent developments were saddening for the sector saying the banks were supportive of the remedial measures instituted by the central bank.

It was incumbent upon the financial sector to root out the fraudulent issuance of bank cheques in instances where there were insufficient funds in accounts to back them.

"The good faith between banks seems to have been misplaced in this instance. It was because of good faith that one bank could accept a bank cheque from another," he said.

ZSE chief executive Mr Emmanuel Munyukwi acknowledged that fraudulent activities on the bourse and pledged to work with the central bank to rid share trading of such malpractices.

"Indeed, we had a lot of hot money in the market and we do not need that money. Perhaps we did not move fast enough, but measures will be taken to ensure we protect the poor man in the street."

Securities Commission chairperson Mrs Willia Bonyongwe said work had started to revamp some of the existing laws and regulations on the ZSE.

"We will not tolerate any rogueness. As a commission we will leave no stone unturned . . . there is need for more rigorous supervision on the stock market," she said.