Banking industry facing fresh cash crisis

By Tichaona Sibanda
25 January 2008

Customers thronged to their banks on Friday after reports suggested that most financial institutions in the country were on the verge of collapsing because of serious liquidity problems.

Reserve bank governor Gideon Gono claimed this week that major commercial banks and other financial houses are facing a critical liquidity crisis largely caused by unlawful speculative investments, which are now threatening to ruin the stricken institutions.

Our Harare correspondent Simon Muchemwa told us that several banks have this week written to the Reserve Bank requesting unsecured loans after experiencing serious cash problems as depositors’ money is tied up in investments, real estate and foreign currency bought on the parallel market.

‘This is a mirror image of the crisis that rocked the country’s banks in 2004 and if it is not handled carefully it could lead to more woes for the country’s banking industry,’ Muchemwa said.

He said banks are blaming skyrocketing operating costs, which are outstripping income. The country is in the throes of an economic recession characterised by high inflation which now hovers above 100 000 percent, high unemployment, and chronic shortages of foreign currency, fuel and basic goods like sugar, beef and the staple cornmeal.

The Zimbabwe Independent reports that information gleaned from within the financial sector showed that this situation has triggered the panic.

It said all the banks — Barclays, Stanbic, Standard Chartered, CFX
Bank, Kingdom, NMB Bank, ZB Bank, MBCA, ZABG, FBC, CBZ, Agribank, ABC Corporation, Genesis, Premier, Interfin and Renaissance, as well as building societies such as CABS, Beverley, FBC BS and Intermarket — are in dire straits.

‘The banks are facing liquidity problems because they cannot secure
cash applications from the Reserve Bank and have failed to pay their
statutory reserves to the central bank. Despite the bank printing up to $800 trillion to alleviate the cash shortages, banks are failing to collect their cash requirements due to lack of security,’ the weekly paper said.