Hope for AfrAsia depositors

01 Mar, 2015 - 00:03 0 Views
Hope for AfrAsia depositors KINGDOM BANK

The Sunday Mail

KINGDOM BANK

KINGDOM BANK

The Depositors Protection Corporation (DPC) will pay out US$3,3 million to over 18 000 AfrAsia depositors following the bank’s closure after the Reserve Bank of Zimbabwe cancelled its operating licence last week.

The DPC says 18 300 out of 22 000 depositors as at January 31, 2015 will be paid in full up to US$500 per person once they file in their claims.

Most of AfrAsia’s clients had remained with account balances of less than US$500 after switching banks.

Clients with balances above the insurable limit of US$500 will still be paid their deposits through the liquidation process upon the realisation of assets.

DPC public relations manager Mr Allen Musadziruma told The Sunday Mail Business last week that “generally, bank closures negatively affect depositor confidence in the banking system”.

The DPC was established in July 2003 in terms of the Banking Act (Chapter 24:20) as read with Banking (Deposit Protection) Regulations, Statutory Instrument 29 of 2003 to monitor and assess risk of member institutions and undertake liquidation of failed banks.

“However, despite being the last resort, a bank closure may be a necessary procedure in order to protect the interests of depositors and creditors and preserve the overall stability of the banking system.

“Closure of failed banks that are of no systemic importance has the beneficial effect of removing bad apples from the system, in order to retain only safe and sound institutions which are able to fulfil their financial intermediation responsibilities,” said Mr Musadziruma.

Market watchers said the closure of AfrAsia just under three months after the closures of Trust Bank and Allied Bank, casts a huge shadow over the capacity of locals to steer their banks to profitability.

Several other local banks such as Royal, Genesis, Interfin and Capital, had their licences withdrawn by the apex bank after failing to meet the regulator’s minimum capital requirements.

This has raised questions over local banks’ corporate governance systems since foreign-owned banks – Barclays and Standard Chartered Bank, Stanbic, MBCA, and Cabs, an Old Mutual subsidiary – hold a combined deposit base of over US$2 billion.

The banking sector is saddled by over US$800 million bad loans – the bulk are on local banks’ books.

Before last week’s closure of AfrAsia Bank, the banking sector had gone down to 19 operating institutions comprising 14 commercial banks, one merchant bank, three building societies and one savings bank.

Thirteen of the 19 operating banking institutions were in compliance with the prescribed minimum core capital requirements as at December 31, 2014 with one bank having already surpassed the US$100 million minimum capital requirement for the Tier 1 strategic group which is effective in 2020, while four have capital levels above US$50 million.

The central bank is monitoring banking institutions that are not compliant with minimum capital requirements.

However, banker Mr Gilbert Muponda admitted that the closure of AfrAsia would not have a significant impact on the banking sector since it only had less than 2 percent of the market share.

“It was a very small bank (and the) RBZ had already indicated this eventuality in its maiden Financial Stability Report. The RBZ has indicated that all weak and unstable banks should shape up by 30 June 2015,” said Mr Muponda.

Mr Muponda co-founded ENG Capital with Mr Nyasha Watyoka but the company folded amid allegations that they squandered depositors’ money. He later founded the Gilbert Muponda Research Institute – GMRI Capital – which focused on financial, economic and political research.

Meanwhile, Mr Muponda said his team was “working hard” although “we do not have a timetable yet” for a return to the banking sector.

RBZ Governor Dr John Mangudya recently cleared the way for Mr Muponda’s return into the banking sector after saying the central bank has “no adverse information” against him.

Nonetheless, Dr Mangudya clarified that anyone will be vetted for “fitness and probity” should they apply for licensing or intend to acquire a significant stake or apply for appointment as director or senior manager for a banking or micro-finance institution.

Mr Muponda said: “We are reviewing our options but leaning towards an investment bank model which does not rely on deposits but on skills, networking and talent.

“I am not scared of bank failures because we intend to deploy an investment banking model which focuses on wealth creation via efficient pricing and allocation of risk and capital.

“Most banks have remained on Zim dollar based structures with abnormal cost to income ratios and relying on non-existent deposits. We will avoid that.

“We will avoid traditional banking models. Zimbabwe is not overbanked but it has lots of banks offering the wrong products.”

. . . DPC urges depositors to apply

THE Deposit Protection Corporation (DPC) says payments to Allied Bank, Genesis, Royal and Trust Bank depositors are in progress.

“We urge depositors of these institutions who have not yet submitted their claims to contact DPC for reimbursement,” said DPC public relations manager Mr Allen Musadziruma.

The banks’ clients can download claim forms from the DPC website www.dpcorp.co.zw or email to [email protected].

Apart from bank transfers, DPC also utilises Ecocash and Telecash as a way of bringing convenience.

Deposit protection is free for all bank depositors.

By merely opening a bank account with any member bank in Zimbabwe, a person will be covered by DPC up to the maximum insurable limit currently set at US$500 per depositor per bank.

“Depositors do not need to pay anything to us or to their bank; they do not need to complete any application form(s) to be covered by us as coverage is automatic on account opening.

“Any balance above the insurable limit is paid via the liquidation process upon realisation of assets. Depositors will still be reimbursed balances above US$500 through the liquidation process (disposal of assets of a failed banking institution),” said Mr Musadziruma.

The Deposit Protection Fund is established under Section 13 of the Deposit Protection Corporation Act (Chapter 24:29).

The primary objective of the Fund is to compensate depositors in full or in part, for losses incurred in the event of insolvency of a contributory institution. The Fund is vested in and administered by the DPC.

 

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