Bulawayo City Council loses $1m to closed banks

The collapse of several banks in the last few years has cost the Bulawayo City Council more than $1 million in lost savings and consumer transfers.

Despite the provision to recover funds from closed banks through the Deposit Protection Corporation (DPC), council said in its latest monthly report issued yesterday that it was struggling to recover the money, years after the banking institutions collapsed.

Most financial institutions in the country experienced liquidity challenges mainly between 2014 and 2015 leading to the collapse of some. The city council said it was involved with some of the banks in one way or another hence their collapse or closure resulted in some losses.

“Every effort was being made to recover the money that was lost”, said council, which gave a list of four banks owing and their outstanding amounts.

Tetrad Investment Bank tops the list with $536 220 followed by Allied Bank, which owes $476 544. AfrAsia Banks owes $2 787 while MetBank, which survived liquidation owes $32 512, reads the report.

The council said it had investments with Tetrad Bank when it was placed under judicial management by order of the High Court of Bulawayo on 29 January 2015.

“A claim was submitted to the Master of High Court on 6 March 2015. A scheme of arrangement meeting was held with creditors on 6 April 2017 wherein it was arranged that creditors owed above $100 000 be paid $ 5 500, $ 4 500 be written off and the balance be converted to ordinary shares of $0.10 each.

Council was paid $5 500.00 on 29 November 2017 and issued with 5 262 220 shares valued at $ $526 222,” reads the report.Council said it had a balance of $476 544 on money market investments that had been placed with Allied Bank whose licence was cancelled by the Reserve Bank of Zimbabwe on 8 January 2015. A claim was submitted to the High Court in 2015 paving way for the first and second meetings of creditors.

The third and final meeting is yet to be held. Concerning MetBank, council said it closed its account with the institution on 14 February 2014 after it faced liquidity problems.

“At the time of closing the account it had a balance of $146 513 that the bank had failed to remit to Zimra. Of that balance $6 513 had been used partly to pay creditors that had accounts with the bank and another part was withdrawn in cash. The bank paid the balance of $ 140 000 in instalments betweenJanuary 2016 and December 2017. Interest of $32 512 accrued on the balance was still outstanding,” reads the report.

Town Clerk, Mr Christopher Dube, advised that Metbank was disputing the amount it owed council. The AfrAsia Bank account was to be closed on 12 February 2015 after council withdrew the balance in cash (leaving the account with a zero balance).

The report, however, shows that transfers totalling $2 787.40 that were in the pipeline were credited to the account on 19 and 22 February 2015 while the bank was still processing the account closure. The bank was closed on 24 February 2015 and a claim of $2 787.40 was submitted to the Deposit Protection Corporation of which $500 was paid and the balance of $ 2 287.40 is still outstanding.

Councillors have blasted the management for engaging banks with dubious reputations and warned against involvement in shares using residents’ money.

The report, however, shows some of the shares represented compensation to council, which was now a shareholder. DPC actively participates in the resolution of failing or failed member institutions and liquidation of closed banks in addition to compensating depositors in the event of bank failure.

However, the maximum cover limit is pegged at $1 000.00 per depositor per bank and $250 for clients of deposit-taking micro-finance institutions.

Deposit balances above the prescribed cover limit are payable through the liquidation process on a pro-rata basis. The cover limit is reviewed from time to time in line with the growth of the fund and market conditions, according to DPC and the scope of cover caters for all types of deposits received by a contributory institution in its usual course of business.

This includes time/fixed deposits, demand deposits, savings deposits, interest accrued and/or payable on all deposits, shares in a building society other than capital shares, deferred shares or preference shares and any other liability or financial instrument as may be specified by the corporation from time to time by notice in the Government Gazette. The Chronicle