Key Points
- Zimbabwe’s banking sector sees 13.3% rise in foreign deposits.
- Sector liquidity remains strong, with an average ratio of 57.54%.
- RBZ highlights resilience, but IMF calls for Basel III adoption.
According to Reserve Bank of Zimbabwe (RBZ) deputy governor Innocent Matshe, foreign currency deposits rose 13.3% to $2.64 billion in the year ending October 31, 2024, demonstrating the resilience and stability of Zimbabwe’s banking industry.
Zimbabwe’s banking sector shows resilience amid rising liquidity pressures
Matshe emphasized the industry’s resilience to liquidity issues in the face of currency volatility and hawkish fiscal and monetary measures intended to strengthen the local currency while speaking at the Zimbabwe Independent’s 2024 Banks and Banking Survey and Awards in Harare.
Matshe stated, “Adequate capital levels, satisfactory asset quality metrics, stable liquidity, and sustained profitability all demonstrate the resilience and stability of the banking sector’s condition and performance.”
Only one bank out of 19 is having liquidity issues. In compliance with Section 48 of the Banking Act, the bank is subject to a Corrective Order that was issued on April 2, 2024.
According to Matshe, the RBZ is keeping an eye on its state while the bank’s owners carry out corrective actions.
Foreign currency deposits increased from $2.33 billion in October 2023 to $2.64 billion in October 2024, indicating a rise in industry confidence.
“Growth in foreign currency deposits shows a significant improvement in confidence in the banking sector,” he continued.
IMF urges Zimbabwe to adopt Basel III liquidity standards
Zimbabwe has been urged by the International Monetary Fund (IMF) to give Basel III global liquidity norms top priority. In order to guarantee financial stability, Basel III standards demand improved risk coverage, increased capital quality, and a leverage ratio. Additionally, the structure encourages the accumulation of capital reserves that can be depleted during stressful times.
Despite having billions in depositor cash, several Zimbabwean banks were undercapitalized according to Basel III criteria, according to actuarial science data from July 2023. Banks are required by the Basel III Accord to use internal models, such as the Z-Score, to determine their economic capital.
Matshe affirmed that all banks had sufficient capital as of September 30, 2024, in spite of prior worries.
“The banking sector’s average capital adequacy and tier one ratios were 37% and 32.4%, respectively,” he stated.
Newsday stated that despite a small increase in non-performing loans (NPLs) to total loans to 3.2% as of September 2024, credit risk remained low.
With an average prudential liquidity ratio of 57.54%, which is significantly higher than the 30% statutory minimum, liquidity levels are still high. The minimal liquidity criterion was met by all banks with the exception of one.
“Adequate capital levels, satisfactory asset quality metrics, stable liquidity, and sustained profitability all demonstrate the banking sector’s continued resilience and stability,” Matshe stated.
