The Sunday Mail
Online Reporter
The Reserve Bank of Zimbabwe (RBZ) says it will wind down the operations of the Zimbabwe Asset Management Company (ZAMCO) ahead of the initial 2025 timeline after the entity fulfilled its purpose of eliminating potentially hazardous systemic risk from the country’s financial services sector.
Over the course of its existence, ZAMCO assumed circa $1,2 billion debts from struggling entities.
Central bank governor Dr John Mangudya, in the 2021 Mid-term Monetary Policy Statement (MPS), said the entity had met its $1,2 billion obligations to Government.
“The role of the Zimbabwe Asset Management Company (ZAMCO) in improving the banks’ asset quality has been phenomenal.
“The acquisition of non-performing loans (NPLs) by ZAMCO helped improve and enhance the capital adequacy and earnings of banks through removal of toxic assets and replacing them with risk free assets (treasury bonds) thus providing earning assets that could be used to unlock liquidity as security,” he said.
“ZAMCO has managed to pay off its obligations of $1,2 billion to Government ahead of the sunset time of 2025 and plans to wind off its operations in line with section 57A of the Reserve Bank of Zimbabwe Act are underway.”
ZAMCO was established by the RBZ in July 2014 to deal with systemic risk that was posed by rising NPLs in the local financial services sector.
At the time, NPL levels had peaked at around 20 percent, way above the global benchmark of 5 percent.
Latest central bank data shows that the average non-performing loans (NPLs) to total loans ratio remained low at 0,55 percent as at June 30, 2021, against the international benchmark of 5 percent, which showed “sound credit risk management systems and internal controls,” said the RBZ governor.
In other key fundamentals indicated the MPS, the local banking appears to be in a sound state.
Zimbabwe’s banking sector has remained adequately capitalised, with an aggregate core capital of $57,54 billion as at June 30, 2021, an increase of 8,09 percent, from $53,18 billion as at the close of 2020.
And banking sector average capital adequacy and tier one ratios of 35,32 percent and 25,05 percent respectively, were above the regulatory minima of 12 percent and 8 percent, respectively.
The banking sector’s solid position is also reflected by total banking sector loans and advances, which increased by 73,27 percent from $82,41 billion as at the end of last year to $142,79 billion as at the end of the first half of 2021.
Dr Mangudya said financial intermediation remained stable as shown by a loans-to-deposits ratio of 45,84 percent.
“This position reflects that there is scope for banking institutions to enhance their financial intermediation role. The banking sector continued to support the productive sectors of the economy, as reflected by the ratio of loans to productive sectors to total loans 80,89 percent as at 30 June 2021,” he said.
