By Alois Vinga
RESERVE Bank of Zimbabwe (RBZ) has hailed local banks for maintaining high capitalisation thresholds, sound asset quality, and non-performing loans.
Speaking during the 2021 Zimbabwe Finance Conference (ZFC) held virtually Wednesday, the central bank’s deputy director in Economic Research and Policy Division, Nebson Mupunga said on average, capitalisation levels are double the required limits.
“The Zimbabwe banking sector is characterised by well-capitalised banking institutions with average capital adequacy ratio of 30.04% above the regulatory limit of 12%,” he said.
Capital requirements are standardised regulations put in place for banks and other depository institutions to determine how much liquid capital must be held against a prescribed value of their assets.
Under the current regulations, all banks must have a minimum capital equivalent to US$30 million.
Commercial banks, merchant banks, development banks, finance, and discount houses are required to have minimum capital equivalent to US$20 million while deposit-taking institutions must have an equivalent of US$5 million.
“Good liquidity indicators as shown by an average liquidity ratio of 68.56% well above the stipulated benchmark of 30%,” Mupunga added.
“These factors are critical for banks to be able to underwrite significant business as well as to support the envisaged average economic growth of above 5%,” Mupunga said.
Analysing the latest trends, economist Prosper Chitambara said the capitalisation levels help to ensure stability in the financial sector while creating sustainable financing.
“The capitalisation levels may also be a result of the banks’ hesitancy to lend for fear of a number of past uncertainties in our environment. However, as the current inflation slowdown is sustained, there can be hope that banks can increase lending,” he said.