THE government is considering legislation to force bank mergers to reduce the number of financial service institutions in the country and help ensure the sector’s stability, Finance Minister Tendai Biti has said.

Biti told parliament’s committee on budget, finance and investment Promotion that the country had too many banks adding several barely met minimum capital requirements thereby threatening sector-wide contagion.

“There are 23 banks in the country but some balances are not good. It therefore makes sense that there be mergers that instead of 23 banks we can have 10 or six strong banks,” he said.

Central bank governor, Gideon Gono also warned that a pending increase in minimum capital requirements means that banks barely meeting the threshold must consider merging with better capitalised institutions.

“We therefore urge those banking institutions without realistic chances of meeting the soon to be increased minimum capital requirements to seriously consider mergers and acquisitions or solemnize their proposed marriages,” Gono said in a statement last Friday.

According to last month’s monetary policy statement, Zimbabwe has 17 commercial banks, four merchant banks, four building societies and one savings bank.

“The Reserve Bank is indeed in receipt of recapitalisation proposals from the few undercapitalized institutions that were indicated in my Monetary Policy Statement,” the RBZ chief said last week warning that those failing to meet the requirements would not be allowed to operate beyond April, 2012.

“As previously advised the undercapitalized banking institutions will have up to March 31, 2012 to ensure compliance with the minimum capital requirements,” he said.

“For the avoidance of doubt no undercapitalized banking institution will remain operational in the banking sector with effect from April 1, 2012.”