In the past few weeks since the fall of Genesis and Interfin banks, many doomsday scenarios have been propounded and conspiracy theories peddled by various stakeholders about the current state of the banking sector and how the Reserve Bank of Zimbabwe (RBZ) could have handled the situation better.
The air has been thick with recriminations, so I avoided wadding into the debate earlier in order to gain better perspective on the unfolding situation. One thing I could not help noticing is the sheer number of stakeholders wondering whether they should still trust the RBZ’s “safe-and-sound” pronouncements after the recent developments.
One such stakeholder is Dudzai Ndlovu of Norton. “I write as a poor depositor who has just discovered that the bank where my money is, Interfin Bank, has just been put under curatorship by the Central Bank,” Dudzai lamented, apparently having encountered a similar fate at ReNaissance Merchant Bank.
“As the banking public, we feel that there is a lot that the Central Bank is not disclosing. Instead, it seems that the public is being misled into believing that the banking sector is safe and sound when in fact, the opposite is true.
“The Central Bank should not fold its hands and wait for things to seriously deteriorate . . . Can the RBZ and Treasury please tell us the truth? Is our banking sector still safe and sound?” Dudzai’s letter was given prominence as NewsDay’s “Letter of the Day” on June 14 2012.
“Why did the central bank decide to be reactive rather than proactive? . . . Can we trust them even when they tell us that the sector is in good health?” The Sunday Mail echoed Ndlovu’s sentiments a few days later.
“How many times have we been told that the banking sector in Zimbabwe is ‘safe and sound’ only to learn of yet another banking scam shortly after?” Asked Itai Masuku in his tongue-in-cheek instalment of Candid Comment titled We want BOB! (Boring Old Bankers) in the Zimbabwe Independent a week later.
The Consumer Council of Zimbabwe (CCZ) “helpfully” announced that those affected by the “sudden” turn of events at Genesis Investment Bank and Interfin Bank Limited felt let down by regulators of banks and other responsible authorities, who all along had made the nation believe everything was well within the banking sector.
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Somehow, all these lamentations reminded me of a famous statement attributed to Alan Blinder, former US Federal Reserve vice-chairman. “The last duty of a central banker is to tell the public the truth,” he quipped.
I would, however, hasten to add that the first duty of a central banker is to preserve financial stability by whatever legal means possible.
Granted, the RBZ must move swiftly to calm markets by providing accurate and up-to-date information when a crisis is unfolding but in doing so, they are always mindful not to do so in a manner that instead shakes public confidence, with the unintended consequence of a run on deposits.
This is why central bankers sometimes resort to constructive ambiguity or what governor Gideon Gono once described as “necessary ambiguity with constructive intent”.
This is why I think it is unwise for the banking public to leave it entirely to the RBZ to decide whether banks are sound or not. Of course, no one should disregard the RBZ’s pronouncements about the health of the banking sector; that would be folly because the RBZ is not expected to wilfully or deliberately mislead the public anyway.
I am merely suggesting that the banking public should make concerted effort to engage more proactively with their own banks.
I don’t have a problem when stakeholders seek to hold the RBZ to account for the banking sector’s stability.
I however, have a problem when the whole market appears to rely entirely on one man — the RBZ governor — for a verdict on the soundness or lack thereof of the banking sector.
This may be hard for some people to read, especially those with money stuck in Interfin, but it needs to be said. As members of the banking public, we must not abdicate our primary duty of prudently managing our own finances.
This includes choosing our bankers carefully, managing relationships with them and monitoring their performance. If the bank no longer meets your expectations, call time on the relationship because banks are not like parents who can’t be changed.
As for the CCZ, instead of stating obvious things about feelings of those affected by bank failures, I humbly suggest that they should be focusing more on partnering with the relevant stakeholders to empower consumers through appropriate financial literacy campaigns.
Such education should empower the banking public so that they are able to read tell-tale signs such as what it means for a bank to completely fail to publish its financial statements when other banks do so.
The reason why banks are required to publish their financial results twice a year is to enhance disclosure so that the public can assess their financial health.
How many times do we care to scrutinise the statement of assets and liabilities which is always prominently displayed in the banking hall? As depositors, we should seek a better understanding of how banks function.
If we are waiting for the day when the RBZ governor will stand on top of number 80 Samora MachelAvenue and announce that “such and such bank is in an unsound state, so go and withdraw your money before it is put under curatorship!”, we have a long time to wait.
Weigh in with your insights on [email protected].
.Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory company with interests in banking, technology and agriculture as well as the convergence area among others.
