The Finance Ministry says in the next few weeks, the RBZ will conduct investigations into other banks to avoid a recurrence of events at Renaissance.
Investigations by the RBZ revealed that Renaissance Merchant Bank was undercapitalised after its founder Mr. Patterson Timba acquired a loan to re-capitalise the bank which he failed to repay, prompting government to identify an investor who has since injected US$17 million to avoid a crisis at the bank.
Finance Minister Tendai Biti said government will not allow any bank to fail. Reserve bank Governor, Dr. Gideon Gono said banks should cautiously manage their risk profile especially because the RBZ is not in a capacity to act as the lender of last resort.
â€œThere are laws that give the Central Bank and Finance Ministry obligations and no one should ever feel that they are a shareholder of a bank more so above 10 per cent without consulting the RBZ, the registrar of banks…,â€ said Dr Gono.
As liquidity constraints prevail in the economy, local firms have been forced to borrow money at expensive interest rates and Renaissance could be the first institution caught in liquidity crisis after borrowing and failing to repay in time.