Harare - Zimbabwe is finalising new laws aimed at strengthening its fragile banking industry through measures such as imposing shareholding restrictions and revamping oversight functions to guard against insider loans.
Foreign-owned banks in the country – which include the units of Standard Bank, Nedbank, Barclays, Standard Chartered and Ecobank – have remained the most stable ones but the banking groups’ locally owned counterparts face liquidity and corporate governance problems.
The foreign-owned banks enjoy liquidity support from their international parent companies and have also adopted stricter lending criteria to manage risks from loan defaults.
This comes on the back of bank failures in Zimbabwe that have left the sector vulnerable, prompting calls from economists and other experts for mergers and acquisitions in the Zimbabwean financial services sector.
Banks such as Allied Bank, AfrAsia Kingdom, Genesis and Trust have folded in the past three years.
The Zimbabwean government is now moving in to restore corporate governance in the financial services sector and to shore it up through new legislation and enhancing oversight of the industry.
Bank rates, which have been problematic in the past few years since dollarisation of the economy, have now been capped at 18 percent, with effect from the beginning of this month.
“Shareholding limits for individuals in banking institutions will be reduced from 25 percent to 10 percent of share capital.
“This is aimed at reducing the risk of bank failure arising from undue influence by individuals through a diversified shareholding structure,” Finance Minister Patrick Chinamasa said.
The new banking regulations, contained in the Finance Bill that is sailing through parliament, will “penalise shadow directors like shareholders who direct board decisions behind the scenes when they are not part of the board”.
Chinamasa said such company directors in the banking sector “compromise the independence and objectivity of board decisions” which could lead to bank failures.
President Robert Mugabe has sought to assure the international investor community that the country is fixing its business policies.
Zimbabwe is also seeking to factor in emerging mobile money and payments platforms into its regulations.
Mobile money has grown in Zimbabwe amid distrust between banks and the biggest mobile money operator in Zimbabwe, Econet Wireless, while the Zimswitch platform that links banking platforms in Zimbabwe raised ATM withdrawal charges from $2 (R28) to $3 per transaction.
Under the new banking regulations, the Reserve Bank of Zimbabwe will be allowed to disband its monetary policy committee as the country seeks to restore confidence through continued usage of multiple world currencies.
This comes amid fears that the government is test-running the introduction of the Zim dollar after it issued local coins to ease change problems although the central bank and other government officials have sought to assure the economy the local currency will not be reintroduced.