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Banks in compliance with core capital levels



ALL banks are in compliance with core capital levels that comply with the minimum capital requirements, except for the People’s Own Saving’s Bank (POSB), the monetary policy statement released by the Reserve Bank of Zimbabwe (RBZ) this week has shown.


The policy statement comes at a time when international financial institutions are predicting a downgrade in Zimbabwe’s gross domestic product (GDP).

Last week, securities firm Morgan and Co predicted a 2.5% drop in GDP, a 1.3 percentage point drop from the 3.8% envisaged by Treasury, further downgrading from 4.6% projected in the November 2022 supplementary budget.

Despite the forecast, the RBZ has confidence in the banking sector.

Core capital refers to the minimum amount of capital that a savings bank or a savings and loan company must have on hand in order to comply with central bank regulations.

According to the monetary policy statement, the banking sector was adequately capitalised as at 31 December 2022, with all banking institutions in compliance with the prescribed minimum capital adequacy ratio of 12% and tier-1 ratio of 8%.

The average capital adequacy and tier-1 ratios were 37.15% and 26.92%, respectively.
The central bank says Zimbabwe’s banking sector capital position is considered adequate to absorb unexpected shocks or losses as well as ensuring business continuity.

“The banking sector remains well capitalized with adequate levels of liquidity, high earnings performance and low levels of non-performing loans,” read the policy statement.

While the December 2022 liquidity ratio is lower than that of other months in 2022, it has been higher than the 30% set benchmark.

The ratio had been on a free-fall from December 2021 to December 2022. In December 2021 the ratio was pegged at 64.27%, 61.38% in March, 60.78% in June, 59.51% in September and 59.50% in December.

Aggregate core capital increased by 114.62% from ZW$284.74 billion as at 30 June 2022 to ZW$611.11 billion as at 31 December 2022.

“The growth in core capital was mainly attributed to the capitalisation of retained earnings (including revaluation gains from investment properties, translation gains from foreign exchange-denominated assets) and capital infusion by shareholders,” read the statement.

On the other hand, Standard Chartered Bank is finalising its recapitalisation processes pending the disposal of the institution by its shareholders, while the capital position of ZB Building Society is dependent on the outcome of the current strategic initiatives within the group.

StanChart has been compliant on the capital adequacy ratio (CAR) while being non-compliant on the prescribed minimum core capital.

In line with the approval to recommence banking business, Time Bank, another institution compliant with the CAR only, was permitted to gradually meet the prescribed minimum capital requirements in terms of its strategy which provides for a phased approach to conducting banking activities.

“The Bank will continue to monitor progress periodically to ensure ongoing compliance with prescribed minimum capital requirements,” read the statement.

With independent external audits for the financial year ended 31 December 2022 underway, the external audits and the capital verification exercise by the central bank are expected to confirm the core capital levels declared by banking institutions.

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