THE central bank has appointed an administrator to run the troubled Renaissance Merchant Bank in a bid to prevent a sector-wide contagion following the collapse of a proposed National Social Security Authority (NSSA) rescue deal.
Reserve Bank of Zimbabwe chief, Gideon Gono said Thursday that the stricken bank had been placed under “recuperative curatorship” for six months after investigations uncovered gross operational irregularities.
Renaissance -- headed by Pattison Timba -- is said to be heavily undercapitalised and saddled with underperforming insider loans. The bank is understood to require up to US$55 million in order to meet statutory capital requirements and contingent liabilities.
"This engagement in both cannibalistic and incestuous non-performing insider loans under the veil of a convoluted network of both sister and sinister companies and trusts designed to camouflage reality on the ground disguised the personalities behind them including the purpose for which those transactions were taking place," Gono told journalists in Harare.
He however, insisted that there was no threat of sector-wide problems.
"The financial sector as a whole is generally safe and sound and there is no reason to feel any sense of instability. To do so would be to engage in illogical reasoning because the fact that there could be people in hospital does not mean that the whole country is sick,” he said.
Meanwhile, the development comes as it appeared a rescue package proposed by Finance Minister Tendai Biti had collapsed.
Biti had directed the National Social Security Authority (NSSA) to pump close to US$20 million into the bank but the deal met with spirited resistance from business leaders and labour bodies who said the move was waste of public funds.
Stung by the criticism, Biti appeared to backtrack from the proposal insisting that he had merely asked NSSA to consider the deal.
"A myth has been created by some quarters that we have directed NSSA to give money - we have not, but I want to say this, we could have done that. In terms of Section 26 (A) of the Insurance Act, the Minister of Finance has got powers of directing the deposits of insurance companies into what are called "prescribed assets," Biti said.
"I have got powers of directing Zimre, Afre and Old Mutual, NSSA to say put your money there, I could have acted on that matrix."
The bank’s problems came to light after it emerged directors had failed to repay a loan shark who had advanced the institution funds to help it meet its statutory capital requirements.