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Oliver Kazunga Senior Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) says the Banking Act – currently under review – will make boards and senior management of financial institutions criminally liable to bad lending in order to restore sanity to the sector.

Following concerns over the collapse of several banks largely due to bad corporate governance practices, the central bank says sterner measures are required to protect depositors and enhance confidence in the financial services sector.

More than 600 workers have lost jobs in the banking sector since January this year following the recent closure of Allied and AfrAsia Banks.

Several other banking institutions have folded in the last four years, raising concern over the viability of the sector, seen as a key enabler in economic growth in terms of recapitalisation of different industry sectors.

RBZ Deputy Governor Kupukile Mlambo told a gathering during the 2015 National University of Science and Technology (Nust) Insurance and Actuarial Science Society Corporate dinner in Bulawayo Friday that the apex bank was worried about bank failures.

He attributed the demise of most banks to bad corporate governance practices.

“We’re putting together banking sector reforms. We’re changing the Banking Act to make boards, directors and senior management of banks criminally liable to bad lending,” said Mlambo.

“At the moment a lot of banks are in trouble because of bad corporate governance practices.

“We’ve shareholders and senior managers of banks and they’re the ones who actually owe banks the most… we want to stop that. We’ve to make senior managers and bad boards criminally liable for bank failures.

“So if you’re on banks’ boards be careful.”

Statistics indicate a majority of banks that have folded were choked by ballooning bad loans extended to top executives and serial debtors that include individuals and companies.

Firms dominating the loan book of failed banks such as AfrAsia, Allied Bank and Interfin Holdings include RioZim, Lunar Chickens (owned by former RBZ governor Gideon Gono), West Properties (owned by Ken Sharpe), Harambe Holdings (previously controlled by David Govere), Croco Holdings (controlled by Moses Chingwena), and ZimAlloys (in which businessman Farai Rwodzi was a key shareholder).

AfrAsia, Allied Bank, Interfin and Tetrad Investment Bank’s top debtors owe a combined $206 million.

Although Tetrad is still open, its operations are unstable as the monetary authorities directed the institution in November to stop taking deposits and issuing loans until it was properly recapitalised.

Tetrad Investment Bank provisional judicial manager Winsley Militala recently indicated in the financial institution’s report on provisional judicial management that its unsecured loans amounted to $25,1 million, which is 40 percent of its loan book.

He reported that owing to undercapitalisation, as evidenced by negative core capital of $38,2 million, the bank’s financial position was inadequate to cover the risk to which it was exposed.

Meanwhile, Mlambo said they were also working on resuscitating an interbank facility, which RBZ suspended following the adoption of a multicurrency system by the country in February 2009.

“We’re also setting an inter-bank facility because at the moment we don’t have a system and a normal central bank environment where a central bank is a lender of last resort.

“We’ve an interbank facility where banks can lend money to each other and borrow from the central bank,” he said.

Presenting the 2015 monetary policy statement, RBZ governor John Mangudya announced that the $200 million interbank facility supported by the African Export-Import Bank (Afreximbank) under the Afreximbank Trade Debt Backed Securities (AFTRADES) was now operational.

He said the facility would be managed by the Reserve Bank as an agent bank for Afreximbank for the purposes of managing the surplus and deficit participants’ requirements under AFTRADES.