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25 Oct 2013 00:00
Loss caused: The Reserve Bank, which cannot be sued, garnished forex from commercial banks that was never returned. (Aaron Ufumeli)
The Bankers' Association of Zimbabwe (BAZ) has warned of grave consequences for the sector following a Supreme Court judgment directing Standard Chartered Bank to repay a client for funds garnished by the Reserve Bank of Zimbabwe (RBZ).
The association fears the ruling could open the floodgates for other legal suits against banks by clients for funds that were used and not repaid by the Reserve Bank.
During the hyperinflationary era between 2000 and 2008, the Reserve Bank ordered commercial banks to surrender foreign currency to the central bank, which used the scarce forex to pay for fuel imports, maize seed, fertiliser and farm implements, which were given to farmers for free.
The foreign currency was held in the accounts of individuals, private companies, universities, nongovernmental organisations and trusts.
According to reports, the forex was also used to sustain the military, police and government departments, and to settle national debts.
There have also been more recent concerns that some of the garnished money, $1.5-billion in total, could have been taken by senior officials.
This follows allegations of corruptions by a former central bank senior employee, Munyaradzi Kereke, levelled against the Reserve Bank governor, Gideon Gono – although Gono has dismissed the claims.
The victims of the foreign currency raids have fought many futile battles with the banks for the return of the money. But the banks have argued that its was seized from them, hence the Reserve Bank should be answerable.
So the ruling last week ordering Standard Chartered Bank to reimburse a client with the $47 739.86 the bank surrendered to the central bank six years ago has set a precedent that could lead to banks repaying the all money that was garnished.
A senior bank association official, who spoke to the Mail & Guardian this week on condition on anonymity, said that, at the time, the Reserve Bank suspended the licences of banks to operate foreign currency accounts and all financial institutions had to transfer forex to the central bank.
The banks were told to maintain "mirror accounts" and the Reserve Bank would pay a generous 12% a year interest on these balances.
Customers liquidate forex balances
Some customers, he said, chose to liquidate their forex balances in exchange for Zimbabwe dollars and those who chose to maintain their accounts were able to access their money for a short time.
"At some point, however, the RBZ started failing to pay out the funds upon application and demonstration by clients that the money was for legitimate use, and, as time went on, the Reserve Bank took the money".
The official said, as a result, relations between the association, its clients and the Reserve Bank were destroyed.
He said Standard Chartered has been made a guinea pig and every bank will be taking legal advice following the judgment.
Legally, the Reserve Bank is immune from prosecution.
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