{"id":404408,"date":"2011-04-28T03:16:08","date_gmt":"2011-04-28T03:16:08","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/04\/28\/finance-minister-warns-of-bank-crisis\/"},"modified":"2011-04-28T03:16:08","modified_gmt":"2011-04-28T03:16:08","slug":"finance-minister-warns-of-bank-crisis","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/04\/28\/finance-minister-warns-of-bank-crisis\/","title":{"rendered":"Finance Minister Warns of Bank Crisis"},"content":{"rendered":"
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\"The<\/a><\/p>\n

Golden Sibanda<\/p>\n

27 April 2011<\/p>\n

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Finance Minister Tendai Biti has expressed strong concerns over a high loans default rate amid fears this could trigger a banking sector crisis.<\/p>\n

On Tuesday, as he updated Zimbabwe’s economic performance for the first quarter, Minister Biti said 34 percent of bank loans had not been repaid.<\/p>\n

He said he was also concerned over the level of loan-to-deposit ratio, which he said stood at 76 percent. He hinted the sector faced loan default risk.<\/p>\n

This ratio becomes unsustainable in the face of the liquidity crisis prevailing and the high rate of defaulting loans. A loan-to-deposit ratio of up to 80 percent is acceptable in a liquid developing economy.<\/p>\n

In this regard, Treasury has directed the Reserve Bank of Zimbabwe to correct the precarious situation before the bubble bursts.<\/p>\n

But this comes on the back of strong calls by fiscal and monetary authorities last year that banks were reluctant to extend loans.<\/p>\n

“The banking system remains vulnerable with weak capitalisation, raising non-performing loans and tight liquidity situation,” the minister said.<\/p>\n

“Non-compliance to minimum capital adequacy threshold requirement by small banks is worsening vulnerabilities in the sector.”<\/p>\n

Minister Biti said seven banking institutions were yet to meet the RBZ prescribed minimum capital requirements. There are 28 banking institutions.<\/p>\n

Commercial banks were required to have a minimum capital of US$12,5 million by March last year, but to date a number are yet to comply.<\/p>\n

Minister Biti’s concerns vindicate the warning by Bankers’ Association of Zimbabwe vice-president Mr George Guvamatanga last year in his address to the 41st Institute of Bankers of Zimbabwe winter school in Nyanga.<\/p>\n

The Barclays Bank Zimbabwe managing director warned of a banking sector crisis. He said this was because the banks had gone on a “lending overdrive”.<\/p>\n

He said without a credit rating bureau, the banks ran the risk of loaning to people and organisations buckling under credit from other lenders.<\/p>\n

Mr Guvamatanga said following calls for banks to lend, a number of them were advancing loans without demanding adequate security.<\/p>\n

Deposits reached US$2,36 billion in January, increasing to US$2,4 billion in February as loans increased from US$1,81 billion to US$1,88 billion, representing a loan deposit ratio of 76 per- cent.<\/p>\n

Despite the growth in the deposits base, interest on savings at 1 percent has remained largely low, but interest on savings of up to three months have improved to between 9 percent and 12 per- cent.<\/p>\n

But lending rates have remained unsustainably high, ranging between 15 percent and 30 percent with over 90 percent being short term.<\/p>\n

Meanwhile, Minister Biti said the restructuring of the RBZ balance sheet was at an advanced stage, which would result in the transfer of non- core assets and liabilities to a special purpose vehicle.<\/p>\n

This would also include verification of the central bank’s debt to establish what debt would be retired through proceeds from the sale of quasi-fiscal assets while the State would assume the balance.<\/p>\n

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\nFinance Minister Warns of Bank Crisis<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Golden Sibanda 27 April 2011 Finance Minister Tendai Biti has expressed strong concerns over a high loans default rate amid fears this could trigger a banking sector crisis. On Tuesday, as he updated Zimbabwe’s economic performance for the first quarter, Minister Biti said 34 percent of bank loans had not been repaid. <\/p>\n","protected":false},"author":0,"featured_media":397969,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":{"0":"post-404408","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-local-news"},"yoast_head":"\nFinance Minister Warns of Bank Crisis - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2011\/04\/28\/finance-minister-warns-of-bank-crisis\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Finance Minister Warns of Bank Crisis - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"Golden Sibanda 27 April 2011 Finance Minister Tendai Biti has expressed strong concerns over a high loans default rate amid fears this could trigger a banking sector crisis. 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