Pursuant to the enactment of the Banking Amendment Act, 2015, the Reserve Bank of Zimbabwe (RBZ) this week said it will leave no stone unturned to ensure that bad apples are not allowed to operate deposit-taking institutions.
John Mangudya, the RBZ governor, told the Financial Gazette yesterday that consistent with the amended law – gazetted a fortnight ago – the Registrar of Banking Institutions would rigorously vet persons considered for appointment as directors or executives of any financial institution operating within the central bank’s jurisdiction.
This is meant to ensure that all those who were associated with failed banks, and are deemed to have contributed to their demise, do not get the chance to handle depositors’ funds again. More than 30 banks have twisted in the wind since 2003.
Interestingly, the collapsed institutions were all indigenous. An interrogation of the underlying causes of the bank failures heaped much of the blame on high levels of non-performing loans, with the bulk of them having been advanced to insiders without any form of collateral. Other factors that led to their collapse include poor capitalisation, weak corporate governance practices and mismanagement.
“The old Act had its shortcomings, which shortcomings have now been addressed through the Banking Amendment Act, 2015. This new law puts a lot of emphasis on strict adherence to the tenets of corporate governance because deficiencies in this area largely contributed to the collapse of many of our banking institutions,” said Mangudya.
“As we apply this Act, we have adopted zero tolerance to such deficiencies. For example, the new law obligates us to sieve out the chaff from the wheat so that bad apples are not allowed to operate banks, be it as directors or as executives,” he added.
He said in terms of the amended Act, the Registrar of Banking Institutions would not approve the appointment or re-appointment of a person as 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 ground that it was unable to pay its debts or contravened any regulatory requirement applicable to it.
While this is the case, there shall be exceptions whereby the foregoing would not apply if the person satisfies 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.
The registrar is responsible for registering banking institutions as well as cancelling their registration in terms of the Act. The registrar can also perform other functions conferred or imposed upon him or her in terms of the Act or any other enactment.
Among the institutions that fell by the wayside between 2003 and 2015 are the following: Trust Bank Corporation, Royal Bank, NDH Holdings, Interfin Banking Corporation, Barbican Bank, Genesis Bank, Capital Bank, Allied Bank, Century Holdings Limited, ReNaissance Merchant Bank (RMB), ENG Asset Management, Kingdom Financial Holdings Limited (KFHL), CFX, Zimbabwe Allied Banking Group (Allied), Intermarket Holdings Limited, First National Building Society and Tetrad Financial Holdings.
Meanwhile, the central bank has since cleared a number of bank executives/directors who were associated with some of the failed banks.
Among those cleared are Patterson Timba, the founder of RMB and chief executive officer of ReNaissance Financial Holdings (RFHL); Lynn Mukonoweshuro, former group chief executive officer (CEO) of KFHL; and Nicholas Vingirai (Intermarket).
As with RFHL, the RBZ issued a corrective order on the institution in June 2011, its staff and shareholders, which it duly lifted on February 26, 2016. Subsequent to that, the dispute which was before the Administrative Court was withdrawn and effectively settled out of court, with each party meeting its own costs.
Still in February this year, the High Court also ruled that RMB’s curator, Reggie Saruchera, had acted outside the law in purporting to dispose RFHL’s assets to the National Social Security Authority, working with people who had been validly dismissed from the institution. The High Court effectively declared all those transactions null and void and of no legal force.
Regarding Vingirai’s case, the RBZ wrote to his lawyers advising them that “there is no indication of deliberate externalisation or exchange control related issues against him as was initially preferred….to this end, we have no hesitation in requesting you as his legal counsel to do everything legal and possible to get him to recover his assets and most urgently the farm…”
While Mukonoweshuro was the group CEO of KFHL, the RBZ has also cleared the banker because she was not responsible for the conduct that led to the collapse of the institution.
Last week, the Financial Gazette published a story titled “Bankers blacklisted”, which has been interpreted in some quarters as implying that Timba, Mukonoweshuro and others who were listed within the body of the story were blacklisted by the RBZ, when this was not the case.
The Financial Gazette therefore unreservedly apologises to these bankers, including their families and associates for the inconvenience such interpretation might have caused. Financial Gazette
