Zimbabwe’s banking crisis continued to mount on Thursday with the forced closure of another large commercial bank by the Central Bank, the fourth such bank to be shut down this year due to liquidity woes.
Trust Bank Ltd, a subsidiary of Trust Holdings Ltd, was placed under curatorship for six months by the Reserve Bank of Zimbabwe (RBZ) because of persisting liquidity problems.
Trust becomes the fourth commercial bank to be placed under curatorship this year. Intermarket, Barbican and Royal have met the same fate.
This comes barely seven days before the September 30 RBZ deadline for banks to raise their minimum paid-up share capital to Z$10-billion.
Trust Bank has over the past year been bailed out by the central bank which enabled it to remain afloat. At the time of its closure on Thursday, the bank owed the RBZ about Z$1,4-trillion, an amount equal to the country’s domestic debt.
Problems at Trust came to a head on Wednesday when board chairperson, Tichaendepi Masaya, was booted out at the bank’s emergency general meeting.
”The RBZ took this action after determining that the various turnaround strategies and measures that Trust Bank had pursued failed to address the liquidity and solvency challenges the bank has been facing since the last quarter of 2003,” the RBZ said in a statement on Thursday.
It said notwithstanding the assistance granted to Trust under the Troubled Banks Fund, liquidity challenges persisted. Mergers failed to materialise whilst the bank’s shareholders were unable to recapitalise the bank.
The RBZ said one of the consequences of placing Trust under a curator was that the ”institution of all legal proceedings and the execution of writs, warrants and summons is now stayed”.
This means that the bank will be closed for the next six months.
The latest development comes hard on the heels of the extension of curatorship for Barbican and Intermarket by the central bank this week.
On Tuesday RBZ governor Gideon Gono told a parliamentary enquiry that nine financial institutions might not be able to meet their capitalisation requirements.
The RBZ has this year placed several of the country’s newly opened banks and asset management firms under curatorship.
As a result, hundreds of thousands of depositors have been unable to withdraw their wages and savings.
In April the central bank announced new measures to tighten the operation of locally-owned banks which have been blamed for plunging the country into its worst economic crisis in living memory.
Several high-profile bankers, businessmen and politicians have been arrested or fled the country for alleged financial crimes, including funnelling foreign currency abroad.
Zimbabwe’s financial sector crisis came to light after President Robert Mugabe appointed a new Central Bank governor last year who unearthed the malpractices and mismanagement in the sector.
Central bank governor Gideon Gono said the house-cleaning exercise in the banking sector ”has helped a great deal to avoid a system-wide collapse of our financial sector”. ‒ AFP, – Zimbabwe Independent