banking sector.jpgBanks are facing an acid test in terms of compliance with the Reserve Bank of Zimbabwe minimum capital thresholds ahead of the December 31 deadline this year, amid calls from stakeholders for a sound and safe financial industry.

With only three weeks to go before the 31 December 2010 deadline for banks to  comply with the Reserve Bank of Zimbabwe’s prescribed minimum capital requirements, stakeholders are interested in assessing whether the country’s banking sector will be adequately capitalized, in a move that will signal its efficiency in covering any risks and protecting depositors funds.

Under the new thresholds announced by the central bank in December last year, commercial banks are to have US$12, 5 million as minimum capital, merchant banks US$10 million ,building societies and discount houses US$7,5 million and asset management firms US$500 000.

Although official data reveals that bank deposits have increased from US$400 000 in February last year to US$2,1 billion as of October this year, the financial sector is however experiencing challenges in mobilising adequate funds to sustain operations.

 

A business analyst, Mr. Enock Nyika says commitment by some financial institutions in courting strategic partners is a reflection of how banks are geared to comply with the regulations.
 
While the country’s banking industry is currently heavily concentrated with 4 top tier banks namely CBZ Bank, Standard Chartered Bank, Barclays Bank and Standard Bank accounting for almost 60%  of the total deposits, emerging or new players in the financial sector are under the spotlight on whether they can raise funds with some resorting to mergers with willing partners.

 

An economic commentator, Mr. Godfrey Dupwa believes the survival of the banking industry will depend on alternative investment portfolios such as treasury bills and Government bonds.
 
While undercapitalized banks have been directed to seek new funds through floating rights offers on the stock market by seeking fresh funds from the existing shareholders, it has emerged that all has not been rosy as efforts to do so are failing to materialise on the back of liquidity constraints , a move that  has been described by a financial expert Mr. Anymore Taruvinga as worrisome to depositors.

With the first half of the year having been characterised by the disposal of business units  and rationalisation of activities by the banks as they seek to realign their capital positions to unlock returns, what many stakeholders would want to know is the fate of those financial institutions which will fail to raise the required funds.

 

The decision however entirely rests on the monetary authorities.