Many of Zimbabwe’s small indigenous banks may be forced to merge or close their doors because they do not have enough equity, according to minimum capital requirements set out by the Reserve Bank of Zimbabwe (RBZ).
Last June, RBZ mandated that all banks had to have at least $25 million in cash and other assets by December 31, the end of 2012.
RBZ chief Gideon Gono signaled Tuesday that the government might give the struggling banks more time to comply.
The capital equity rules require commercial and merchant banks to have $100 million in assets by the end of June 2014. To help ensure compliance, the banks had to demonstrate they reached 25% of that or 25 million dollars - by the end of 2012.
They need to reach the 50 percent level by June 30, 2013, 75% by year-end 2013 and full compliance by June 30, 2014. But RBZ sources tell Studio 7 that only 8 of 22 banks in the country reached the $25 million target.
Of those, CBZ, Standard Chartered, Barclays, Stanbic, BancABC, FBC and ZB not only met the target, they surpassed it.
Reaching the targets is more difficult for most indigenous institutions, like Royal Bank, which is now facing liquidation.
Other struggling banks that may be forced to merge in order to survive include Kingdom, Zimbabwe Allied banking Group, Agribank, Intefin and Ecobank.
Independent economic consultant and former Zimbabwe National Chamber of Commerce president Luxon Zembe explains why smaller banks struggle to meet the requirement.
RBZ’s previous capitalization rules required commercial banks to hold assets worth only $12.5 million. Merchant banks had to have assets of at least $10 million.