The Sunday Mail
Creditors who are owed money by six failed banks have slim chances of recovering their dues as it has emerged the financial institutions have an aggregate net liability of over US$200 million.
The now defunct Afrasia (formerly Kingdom), Allied, Interfin, Royal, Trust and Genesis Investment banks are unable to pay the bulk of their creditors given that their liabilities of US$350 million far outweigh their US$139 million worth of assets.
Deposit Protection Corporation CEO Mr John Chikura told The Sunday Mail Business, “Now the net liability is US$210 million. If they had assets, we could sell them and pay out. The problem is the liabilities are greater than the assets.”
So far, the DPC has recovered US$35 million from the banks’ debtors and assets, and the next step would be to sue directors of failed financial institutions to recover funds.
“That is why the DPC has been suing the directors of these banks because they have depositors’ funds and we must recover all of it,” he said.
The DPC commenced operations on July 1, 2003 as an independent statutory body established by Government to administer the Deposit Protection Scheme.
A deposit protection scheme enhances consumer protection in the event of bank insolvency.
Since 2003, the DPC has compensated depositors of nine failed banking institutions: Century Discount House, Rapid Discount House, Sagit Finance House, Genesis, Royal, Interfin, Trust Bank Corporation, Allied and Afrasia.
Some financial institutions made resolution arrangements outside the DPC, and these are National Discount House, High Veld, Intermarket, and Trust, Royal and Barbican banks whose assets were sold to Zimbabwe Allied Banking Group in 2005.
Mr Chikura added, “The supervisor, the Reserve Bank, must not allow banks to operate when they have run out of capital. If they use their capital and exhaust it, they must not be allowed to use depositors’ money to pay salaries, pay rent or pay bonuses out of depositors’ funds.
“If the RBZ closes these banks when their assets are still intact, then the position will be better, the recoveries will be better.”
As part of ongoing compensation to depositors of six banks under liquidation, the DPC has paid out US$3,2 million.
The number of depositors in the closed banks is 54 990, of whom 11 600 have been compensated.
All registered banks are required to pay 0,2 percent of their deposits per year towards the Depositors’ Protection Scheme.
Eligible deposits are protected up to a maximum of US$1 000 per depositor per bank (effective June 1, 2016) and US$250 per deposit taking micro-finance banks which is paid immediately upon closing of a member institution.