Zim banks meet minimum capital requirements

THE Reserve Bank of Zimbabwe (RBZ) says most financial services institutions have met the minimum capital requirements of US$30 million or local currency equivalent, ahead of the December 31 deadline as stipulated by law.

Although there were fears that a number of commercial and foreign banks would struggle to meet the deadline due to the coronavirus pandemic and the economic challenges in the country, the RBZ said banks had remained resilient in the face of the headwinds.

“Most banking institutions have made significant progress towards meeting the new minimum capital requirements effective 31 December 2021. In order to ensure that every institution is afforded the prescribed time for compliance with the new minimum capital requirements, the Reserve Bank will communicate the compliance status post deadline of 31 December 2021,” RBZ Deputy Governor Jesimen Chipika said at the weekend.

This comes as some banks, such as NMB Bank, Steward Bank, Stanbic Bank and First Capital Bank have indicated in their half-year financial statements that they met their U$30 million minimum capital requirements ahead of deadline.

According to central bank regulations, large commercial and foreign banks (tier 1) are required to have minimum capital of US$30 million, while tier 2 merchant banks, building societies, development banks, finance and discount houses should have minimum capital of US$20 million.  Smaller deposit-taking microfinance banks (tier 3) are required to have at least US$5 million capital by the end of the year.

Chipika noted that despite the negative effects of the Covid-19 pandemic on the economy “all banking institutions have put in place and communicated capitalisation plans towards meeting the minimum capital requirements”.

“Any banking institutions which may or will face challenges in implementing its capitalisation plans in order to meet the capitalisation deadlines will be engaged on a case by case basis,” she added.

Cognisant of the prevailing economic challenges, the RBZ initially extended the deadline for banks’ compliance from December last year to December 31 this year.

The central bank also ordered banking institutions to continue assessing the adequacy of their capital levels against their risks. It urged particular attention to be given to credit risk, operational risk and business risk, which had significantly increased due to the Covid-19 pandemic that has affected millions globally.

Chipika indicated that it was highly unlikely that the apex bank would extend the minimum capital requirements deadline beyond this year.

“The new minimum capital deadline of 31 December 2021 subsists. Banking institutions have been urged to give priority to the capitalisation issue ahead of the deadline. The bank continues to monitor banking institutions’ capitalisation levels as well as adherence to capital adequacy ratios,” she said.  

In his Mid-Term Monetary Policy statement, RBZ governor John Mangudya said Zimbabwe’s banking sector was stable, safe and sound, despite the disruptive impact of the Covid-19 pandemic.

“The banking sector remained adequately capitalised, with aggregate core capital of $57.54 billion as at 30 June 2021, an increase of 8.09 percent from $53.18 billion as at 31 December 2020. The banking sector’s average capital adequacy and tier one ratios of 35.32 percent and 25.05 percent respectively, were above the regulatory minima of 12 percent and eight percent respectively,” he said.

Zimbabwe currently has 13 commercial banks, five building societies, one savings bank, eight deposit-taking microfinance institutions, two development financial institutions and 178 credit-only microfinance institutions.