eBusiness Weekly
Africa Moyo and Oliver Kazunga
Two commercial banks have surpassed the $100 million capital threshold which all banks in the same category have to comply with by year 2020. CBZ, the country’s biggest bank by capitalisation, and Stanbic Bank, are the first two to surpass the threshold.
Most of the banks have now passed the $70 million mark, making them well capitalised, with almost two years before the capitalisation deadline.
The capital thresholds were introduced in 2011 by former Reserve Bank of Zimbabwe (RBZ) Governor Dr Gideon Gono.
The thresholds were deemed necessary given the dynamic nature of the financial landscape, regulatory requirements, increase in competition and economic uncertainties which Dr Gono said had placed “unprecedented pressure” on banks to be adequately capitalised.
Commercial and merchant banks were required to increase their capital levels to $100 from $12,5 million and $10 million respectively.
Building societies were directed to raise their minimum capital requirements from $10 million to $80 million while finance and discount houses were to push up from $7,5 million to $60 million.
Microfinance institutions are expected to raise their capitalisation levels from $1 million to $5 million.
By 2014, all the financial institutions were supposed to have met 25 percent of their capitalisation while 100 percent capital adequacy levels are due in two years’ time.
The demand for banks to increase their capital levels came after a spate of bank closures due to low capitalisation levels.
This saw most depositors being creamed off of their hard-earned cash.
Since then, depositors’ confidence in the banking sector has spectacularly collapsed resulting in banking businesses and individuals opting to keep money at home, despite the obvious risks of being attacked by robbers.
As at December 31, 2017, CBZ and Stanbic led in the commercial banks category after achieving $218 million and $135 million respectively.
Statistics from the RBZ also show that Barclays Bank Zimbabwe is now at $79 million with BancABC at $76 million.
Ecobank now has capitalised to the tune of $74 million; Steward Bank ($72 million); Standard Chartered Bank ($71 million); FBC ($71 million); ZB Bank ($65 million); NMB Bank ($61 million); Agribank ($55 million); MBCA Bank ($54 million); and Metbank ($45 million).
The capital levels are way above the current expected level of $25 million.
FBC group chairman Hebert Nkala said: “In the case of FBC Bank, we are confident that the unit will trade itself into compliance, with only $8 million annual profits required between 2018 and 2020 to achieve the capital target of $100 million by 2020.”
In terms of building societies, CABS has achieved $127 million while FBC Building Society is on $47 million).
The National Building Society (NBS) has raked up $43 million while ZB Building Society has $18 million, making it the only one that is yet to reach the current capital threshold of $20 million.
RBZ Governor Dr John Mangudya says aggregate core capital increased by 10,48 percent from $1,24 billion as at June 30, 2017 to $1,37 billion by December 31, 2017 due to an improved earnings performance.
The RBZ says the capital thresholds by end of last year mean that the average capital adequacy and tier 1 ratios were 27,63 percent and 23,97 percent against the required minimum of 12 percent and 8 percent, respectively.
Agribank CEO Sam Malaba believes his bank will achieve the $100 million threshold by year 2020. The bank is wholly owned by Government.
Said Malaba: “Regulatory capital as at 31 December 2017 was $54,9 million and is above the current minimum regulatory capital of $25 million.
“However, the current level of capital is not adequate for the bank to fulfil its mandate on agricultural development and of enhancing food security.
“We thank the shareholder for the $10 million capital allocated in the 2018 national budget, which is a positive step towards achieving the US$100 million capital requirement for a tier 1 bank by 31 December 2020.”
Ecobank chairman David Whatman said his company is well ahead of the RBZ’s approved capital plan of $25 million while ZB CEO Ron Mutandagayi says they expected to meet the minimum capital requirements for its banking operations within the stipulated timeframe largely from organic growth.
