Maravi

(HERALD) No sleepless nights for Gono over banking sector

No sleepless nights for Gono over banking sector
By Golden Sibanda

RESERVE Bank of Zimbabwe Governor Dr Gideon Gono has said the banking sector has now adapted well to the multiple currency system and that people and institutions that lost money in the banks should be restituted to rebuild confidence in the sector.

Dr Gono said this when he appeared before the Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion on Monday during which he gave a detailed account of the state of the RBZ and the banking sector.

The central bank governor said the banking sector had generally stabilised as evidenced by the fact that the central bank had not detected any cases or evidence of deviant behaviour by any of the 28 financial institutions.

However, he pointed out that there was need to be vigilant to protect the rural folk against the use of counterfeit currency.

"The banking sector has by and large been stable in the sense that there are no deviant activities taking place that we have detected. All members are working towards the objective of turning around the economy," he said.

Dr Gono said the sector remained sound despite the fact that a few financial institutions were still to meet the minimum capital requirements the RBZ had set for banks to meet by March this year before extending the deadline.

The initial deadline was moved to October this year and was pushed further to the end of this year to allow banks to mobilise funding from local and external sources in an environment beset by tight liquidity.

The RBZ chief said he was confident most of the banks would be able to meet the minimum capital threshold by the end of this month and would give more time where there was notable progress towards mobilising the resources.

Dr Gono noted that Trust Bank, Royal and Barbican had shown commitment to re-establish their operations following the restitution of their licences. The RBZ boss said competent people were presiding over the unbundling of the Zimbabwe Allied Banking Group, which was a consolidation of Royal, Trust and Barbican, deemed to have failed in 2004.

Efforts would now need to be made to settle all outstanding amounts that included funds belonging to NGOs, individuals depositors and others who lost their money following the switch to the multi-currency system.

The central bank would, however, have to first find a solution to settle its US$1,2 billion debt overhang, 65 percent of which was inherited from previous administrations, as that was constraining it from attaining full functionality.

The debt has been referred to Cabinet, which would decide on the best way to proceed on retiring it.

Dr Gono, however, said shareholders of banking institutions and their creditors will not be compensated for the loss incurred after demonitisation, but the apex bank would restitute banks US$83 million for their statutory reserves used by the RBZ.

The central bank would also compensate corporates an amount of US$80 million and NGOs US$20 million for monies lost to the central bank and used to bust illegal sanctions imposed on the country by Western countries.

Part of the corporates and banks’ funds that were held at the RBZ were used, at the instruction of the Ministry of Finance, to buy maize, medicine, support agriculture and pay International Monetary Fund arrears among others.

Dr Gono said an amount of US$184 million was used to settle Zimbabwe’s arrears with the IMF and for that reason the country retained its membership of the institution and received US$500 million after the global financial crisis.

Labels: BANKING, GIDEON GONO

posted by MrK @ 2:18 PM