The Reserve Bank of Zimbabwe has created a company that will buy non-performing debt from banks.
This came about four years after the Central Bank of Nigeria created the Asset Management Corporation of Nigeria (AMCON) in 2010 to buy Deposit Money Banks non-performing loans following the nation’s 2009 banking crisis.
The Zimbabwe Asset Management Corporation will purchase the loans under commercial terms, and assign collateral and all other rights, the central bank said in its monetary policy statement on Tuesday.
The company will seek “to clean up and strengthen banks’ balance sheets and provide them with the liquidity to fund valuable projects for the economy to rebound and to mitigate loss of confidence,” the central bank said.
Non-performing loans at Zimbabwean banks swelled to 18.5 per cent of total loans, or $705m, in June from 1.6 per cent in 2009, the central bank said. The high level of bad debt is the key threat to the country’s banking industry, Harare-based IH Securities said in May.
ZAMCO, as the company will be known, will finance the purchases through “a combination of non-funded lines of credit, new inflows, long-term bonds and Treasury bills,” the central bank said, according to Bloomberg.
AMCON was created in 2010 to absorbed bad debts of banks and helped save the industry when loans to speculators and fuel importers soared following the 2008 global financial crisis.
It took over three banks in 2011 after the regulator deemed them unable to meet banking requirements.
The Zimbabwean version, ZAMCO, which will be supervised by the Reserve Bank of Zimbabwe, bought $45m worth of bad debt from three banks since August 15, the central bank said.
There are 19 banks operating in Zimbabwe, including units of London-based Standard Chartered Plc and Barclays Plc, as well as South Africa’s Standard Bank Group Limited.
In the case of AMCON, it has acquired NPLs worth trillions of naira from Nigeria banks.
The CBN had on August 5, 2011, revoked the operating licenses of three banks including; Afribank, Spring Bank, and Bank PHB, which according to it, did not show enough capacity and ability for recapitalisation.
In their place, the CBN through the Nigerian Deposit Insurance Corporation established Bridge Banks and transferred the assets and liabilities of the three affected banks to the bridge banks. The bridge banks were Mainstreet Bank Limited (Afribank), Keystone Bank Limited (Bank PHB), and Enterprise Bank Limited (Spring Bank).
Under the new arrangement, MainStreet Bank Limited takes over the assets and liabilities of Afribank; Keystone Bank Limited assumes the assets and liabilities of Bank PHB, while Enterprise Bank Limited takes over that of Spring Bank.
AMCON immediately acquired from the NDIC, the three bridge banks. Accordingly, AMCON injected N679bn into the bridge banks to meet the minimum capital base of N25bn and the minimum capital adequacy ratio of 15 per cent.
AMCON is due to complete the sale of Mainstreet Bank and Enterprise Bank by September 15 this year while Keystone will be sold next year. –Punch.
