Zimbabwean bankers blacklisted

By Shame Makoshori

The Government has blacklisted bankers whose institutions collapsed due to delinquency, effectively sealing the fate of former highfliers accused of precipitating the demise of several financial institutions and shaking public confidence in the sector.

According to the Banking Amendment Act 2015, which was gazetted last week, individuals implicated in the collapse of financial institutions in Zimbabwe can no longer assume directorship in any licensed banking institution in the country.

The legislation, meant to strengthen the financial services sector and restore public confidence battered by the collapse of nearly 30 banking institutions, including asset managers, since 2000, has also come up with heavy penalties for funding terrorism and money laundering.

The new law will also affect executives who ran non-banking institutions that directly controlled the collapsed banks; these have also been barred from sitting on the boards of banking institutions, unless they convince authorities that they were not responsible for the failure of banks under their watch.

The new law, which compels directors in banking institutions to declare their wealth on appointment, also now makes it a serious crime to hold shares in a bank where a close relative is a significant investor.

The Banking Amendment Act empowers bank chief executive officers (CEOs) to report all forms of abuse by shareholders to the registrar of banks at the Reserve Bank of Zimbabwe (RBZ), and gives the CEOs immunity from retribution.

The Act demonstrates government’s determination to bring sanity into the banking sector and is in line with recommendations by an International Monetary Fund for government to ensure financial sector stability in the country.

Banking institutions that have collapsed since 2004 include Trust Bank Corporation, Royal Bank, NDH Holdings, Interfin Banking Corporation, Barbican Bank, Genesis Bank, Capital Bank, Allied Bank, Century Holdings Limited, ReNaissance Financial Holdings, ENG Asset Management, Kingdom Financial Holdings Limited, CFX, Zimbabwe Allied Banking Group (ZABG), Intermarket Holdings Limited, First National Building Society (FNBS) and Tetrad Financial Holdings.

Intermarket Holdings and Kingdom Financial Holdings had commercial banking as well as building society operations. They also ran stock-broking arms, although these were not under the purview of the central bank.

These banks were mostly owned or operated by outstanding bankers, some of whom were considered astute dealmakers and led extravagant lifestyles using depositors’ money.

It would appear the new rules will also affect executives and board members at institutions such as the National Social Security Authority, which controlled Capital Bank before it closed two years ago.

Among prominent former CEOs who led failed banks were Samson Ruturi of FNBS; Jeffrey Mzwimbi of Royal Bank; Ntuli Ncube of Barbican; Patterson Timba of ReNaissance; William Nyemba of Trust Holdings; Eugene Mlambo of Tetrad; and Lynn Mukonoweshuro of Kingdom Financial Holdings, which had become AfrAsia Holdings after a Mauritian firm took over majority shareholding.

Financial officers in the affected banks have also been held liable for the collapse of the banks and will equally be affected by the new measures.

“The registrar shall not approve the appointment or reappointment of a person as a director of a banking institution or controlling company if the person was a director or principal officer of a banking institution or controlling company which, in Zimbabwe or elsewhere, was wound up, liquidated or placed under judicial management or curatorship on the grounds that it was unable to pay its debts or contravened any regulatory requirements applicable to it,” the Act states.

An affected person has to “satisfy the registrar by a sworn declaration that he or she was not responsible for the conduct which led to the institution or company being wound up, liquidated or placed under judicial management or curatorship,” if they are to be removed from the blacklist, the Banking Amendment Act said.

The central bank has blamed the majority of bank failures on shareholder and management delinquency, which resulted in abuse of depositors’ funds as well as unsecured insider loans.

Under the new law, individual shareholding in financial institutions would be restricted to 25 percent of the total nominal value of total voting rights of all issued shares. Attempts to subvert the law would be met with punishment.

Bank CEOs and chief financial officers would be compelled to note any digression by directors and report any breach of banking regulations to the RBZ.

“No secrecy or confidentiality provision in any contract or law shall prevent a chief financial officer or any of the principal officers of a banking institution from furnishing the registrar with the information…and no banking institution… shall dismiss or in any other way penalise the chief financial officer or any principal officer for furnishing such information,” says the Act.

To deal with problems caused by excessive influence in bank management by owners, the Act compels shareholders to hold not more than 25 percent shareholding in banking institutions, and punishes those who violate the law.

The registrar would accept representations to justify exemptions to allow a shareholder to hold more shares in a banking institution than the stipulated thresholds.

A shareholder is equally liable for “shares in the banking institution or controlling company which are held by a close relative of the individual”. In other words, an investor has to declare shareholding held through a proxy.

“If a dividend is paid to or received by any person on any share that is held by him or her in contravention of (the Act), or any share that has been allotted, issued or transferred to the person or registered in his or her name in contravention of (the Act), such dividends shall, if not returned by the person concerned, constitute a debt due to the banking institution or controlling company concerned, and shall at any time after it becomes due, be recoverable in a court of competent jurisdiction by proceedings in the name of the banking institution,” the Act says.

“If the registrar is satisfied that a shareholder of a banking institution or controlling company has unlawfully or improperly influenced a decision of the board in the institution or company or any of its principal officers, or has attempted to influence such a decision, the registrar may, subject to (the Act), by written notice require the shareholder to divest himself or herself of all or any of his shares in the banking institution or controlling company concerned,” says the Act. Financial Gazette