This week, Reserve Bank of Zimbabwe governor Gideon Gono issued a $10 000 limit on instant cash withdrawals.
Customers are required to first notify their banks 24 hours before a transaction.
Gono on (January 31) announced the move during his Monetary Policy Statement.
This has caused anxiety among the banking public with speculation that the banking sector is not sound.
Cash withdrawal notice periods for high-value cash withdrawals have been set at $10 001–$20 000 (one day) $20 001– $30 000 (two days) $30 001– $40 000 (three days) $40 001– $50 000 (four days) $50 001 and above (five days).
“The money market is currently inundated with challenges resulting from the worsening liquidity, delayed cash payments and illegal externalisation of cash,” said Gono.
“In order to facilitate countrywide smooth payment transactions as well as curbing illegal externalisation of cash, all financial institutions are being called upon to moderate instant cash withdrawals to a maximum of $10 000.”
The central bank governor urged the transacting public to make use of alternative payments to ease pressure on banks.
Gono said four local banks face closure as he would not extend February 29, 2012 deadline for financial institutions to meet the minimum capital requirement.
Gono said that non-compliant banks were set to lose their operating licences as they were deemed to be unsustainable.
Several banking institutions are yet to comply with the recapitalisation requirements despite several extensions on the deadline as well as repeated calls by the RBZ for non-compliant banks to consider acquisitions and mergers, as in the case with other economies.
Economist Eric Morgan downplayed the potential crisis saying weak and troubled banks were few, small and of low systemic risk in the banking sector.
“The weak and troubled banks in the sector are few, small and of low systemic importance. Collectively, as at December 31 2011, these institutions had a combined market share below 5% in terms of total assets, deposits and loans.”
He added: “The banking sector remains in a safe and sound condition notwithstanding underlying risks posed by the operating environment, notably volatile deposits, the absence of an active inter-bank market, lack of an effective lender of last resort function, market illiquidity, cash-based transactions and limited access to external credit lines”.
Commercial banks were given a minimum requirement of $12,5 million while merchant banks and building societies were required to have at least $10 and $5 million capital respectively.
“As at December 31, 2011, 20 out of 25 operating banking institutions (excluding) POSB were in compliance with the prescribed minimum capital requirements while all the 16 asset management companies were with the minimum requirement of $500 000,” Gono said.
Two commercial banks — Royal Bank and ZABG Bank — are yet to meet the legal $12, 5 million minimum capital requirements.
ZABG, which was created by Gono in 2004 to save seven struggling banks, is in intensive care with a negative $15 million capital base.
Two merchant banks — Geneses Investment with a $3, 2 negative capital base and Renaissance, which is currently under curatorship — are yet to comply.
Kingdom, which was amongst non-compliant banks at the end of 2011, recently met the statutory requirements after concluding a $9,5 million agreement with its new partner AfrAsia Bank Limited.
RBZ statistics, as at December 31, 2011, revealed that Kingdom’s capital stood at $4,2 million while Royal Bank was at $3,2million.