The Reserve Bank of Zimbabwe has hiked minimum bank capital requirements by 155 percent and linked them to the US dollar.
This will see Tier 1 banks required to maintain the equivalent of US$30 million – which is ZWL 510 million on today’s interbank rate –up from ZWL 200 million.
Banks are required to meet this condition by December 31, 2020.
The Monetary Policy Committee (MPC) reckons the new development will stabilize the financial services sector and ensure banks are in a position to underwrite all transactions, insulating depositors from bank collapses and loss of funds.
“The MPC noted the need for banks to hold sufficient capital to ensure continued stability and soundness of the financial services sector, as well as ensuring that banks continue to be able to underwrite financial transactions that are necessary for improving production and
productivity,” the MPC said in a statement.
In the past, several banks have collapsed as they did not have adequate capital thresholds to maintain a healthy and stable financial services sector.
In July 2019, Finance Minister Mthuli Ncube announced that banks would have to raise their minimum capital levels from ZWL$100 million to up to ZWL$200 million by December 2020.
The RBZ’s key focus on price and exchange rate stability in 2020 is anticipated to put the brakes on spiraling inflation.
“This trend would see the year-on-year inflation coming down to about
50 percent by December 2020,” the MPC adding that as at December 31, 2019 an amount of US$1.5 billion had been traded on the interbank market.
“The MPC resolved to maintain the Bank Policy Rate on Overnight Accommodation at 35%. The interest rate on the Medium-term Bank Accommodation (MBA) facility shall continue to reflect the yield on
the Treasury Bills auction rate which is currently between 15% to 18%.
“The MPC emphasized that access to the MBA window crucially depends on the quantum of medium and long-term productive lending undertaken by banking institutions,” the MPC added.