RESERVE Bank of Zimbabwe (RBZ) deputy governor Innocent Matshe says the banking sector continues to show resilience and stability, as foreign currency deposits rose 13,3% in the year ended October 31, 2024.
This comes as the banking sector faces liquidity challenges on the back of currency volatility and hawkish monetary and fiscal policies.
These policies are being implemented to shore up the local currency.
In his presentation at the Zimbabwe Independent’s annual 2024 Banks and Banking Survey and Awards held yesterday in Harare, Matshe said the banking sector was navigating through tough times.
“Condition and performance of the banking sector continue to demonstrate resilience and stability as reflected by adequate capital levels, satisfactory asset quality metrics, stable liquidity and sustained profitability,” he said.
“Out of 19 operating banking institutions, only one is experiencing liquidity challenges and is currently operating under a Corrective Order issued on April 2, 2024, under Section 48 of the Banking Act [Chapter 24:20].”
He said RBZ was closely monitoring the bank’s condition and performance as corrective measures were being implemented by the institution’s shareholders.
Despite this, he added, confidence in the banking sector improved significantly.
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“Confidence in the banking sector improved significantly as depicted by growth in foreign currency deposits from around US$2,33 billion in October 2023 to US$2,64 billion as of end of October 2024,” Matshe said.
In October, the International Monetary Fund’s technical assistance team noted that adopting the Basel III global liquidity standards in Zimbabwe was now a high priority as it raised concern about the liquidity of local banks.
Basel III, a set of international banking regulations, lists higher and better-quality capital, better risk coverage and the introduction of a leverage ratio as a backstop to the risk-based requirement for banks.
It also introduces measures to promote the build-up of capital that can be drawn down in periods of stress and introduces two global liquidity standards.
In July 2023, actuarial science data showed that most banks failed to remain adequately capitalised and were on very shaky ground despite holding billions of depositor funds based on the Basel III standards.
This was based on the Basel III Capital Accord in particular, whereby a bank should calculate its banking economic capital using internal models like the Z-Score to meet Basel’s financial stability standards.
However, Matshe said as of September 30, 2024, all banking institutions were adequately capitalised.
“The average capital adequacy and tier one ratios for the banking sector were 37% and 32,4%, respectively,” he said.
“Credit risk in the banking sector remained low, albeit with a marginal deterioration in the aggregate non-performing loans to total loans ratio, which stood at 3,2% as at end September 2024.”
He said the banking sector continued to maintain strong liquidity positions, reflected by an average prudential liquidity ratio of 57,54% as of September 30, 2024.
“All banking institutions, except one, were compliant with the minimum prudential liquidity ratio of 30%,” Matshe said.
“The banking sector continues to demonstrate resilience and stability, as reflected by adequate capital levels, satisfactory asset quality metrics, stable liquidity and sustained profitability.”
The Zimbabwe Independent is one of three publications under the privately owned media house, Alpha Media Holdings (AMH), with the others being NewsDay and The Standard.
AMH also owns an online radio station Heart & Soul.
