ZIMBABWE INDEPENDENT BANKS AND BANK SURVEY 2020 MAGAZINE

Reimagining Banking Beyond Survival.
from page 24
CAR (%)
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
23.45%
23.70%
Capital Adequacy Ratio (CAR)- %
26.89%
27.63%
26.32%
30.27%
32.64%
39.56%
61.72%
on profi tability.
The outbreak of Covid-19 and the associated economic challenges
further pose a threat for banks to satisfy the reviewed minimum capital
requirements by 2021.
As a mitigation measure, the Central Bank directed that banking
institutions should proactively reinforce their economic capital levels as part
of resilience capability management.
10.00%
0.00%
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Data Source- RBZ MPS publications
Data Source- RBZ MPS publications
Prescribed minimum capital threshold
ZWL$ Equivalent
Minimum Capital
requirement threshold@
Cognisant of the prevailing economic challenges 2021 Prescribed as well as negative impact
Minimum Capital
of Covid-19 pandemic outbreak, the RBZ extended the deadline for bank’s
Institution Category requirements
compliance with the requirement for meeting the minimum capital levels by
Capital Adequacy Ratio (CAR)- %
one year from December
Large Indigenous
2020
&
70.00%
to December 31, 2021.
foreign commercial
60.00%
Tier
In
I
addition, banking institutions are also required to continue to assess
50.00%
the adequacy of their economic capital levels against their own risk profi les.
40.00% Commercial, merchant,
In fact, particular
B/societies,
attention should be given to credit risk, operational
30.00%
risk Tier and 11 business risk, which have since been signifi cantly increased by the
20.00%
Covid-19 pandemic outbreak.
10.00% Deposit taking- Micro
Tier The III 0.00% dynamic nature of the fi nancial landscape, amid increasing
economic uncertainties have prompted monetary authorities to apply US
Credit Only Micro
dollar linked minimum capital requirements for banks and other fi nancial
Data Source- RBZ MPS publications
entities, in an effort to ensure banks are adequately capitalised at all times.
CAR (%)
Tier I
Tier 11
23.45%
Jun-16
23.70%
current exchange rate of 1
USD: ZWL$81.3486
banks USD 30 million ZWL$ 2.4 bln
Development banks USD20 million ZWL$ 1.6 bln
finance Banks USD5 million ZWL$ 407 million
Dec-16
26.89%
Jun-17
27.63%
Dec-17
Finance Institutions USD25,000 ZWL$ 2 million
Institution Category
26.32%
Jun-18
2021 Prescribed
Minimum Capital
requirements
ZWL$ Equivalent
Minimum Capital
requirement threshold@
current exchange rate of 1
USD: ZWL$81.3486
Large Indigenous &
foreign commercial
banks USD 30 million ZWL$ 2.4 bln
Commercial, merchant,
B/societies,
Development banks USD20 million ZWL$ 1.6 bln
30.27%
Dec-18
32.64%
Jun-19
39.56%
Dec-19
61.72%
Jun-20
In fact, particular
attention should be
given to credit risk,
operational risk and
business risk, which
have since been
significantly increased
by the Covid-19
pandemic outbreak
Tier III
Deposit taking- Micro
finance Banks USD5 million ZWL$ 407 million
Credit Only Micro
Finance Institutions USD25,000 ZWL$ 2 million
Outlook
Are Banks poised to withstand the test of time any longer?
While key performance indicators refl ect a sound and adequately capitalised
banking sector which is key in mitigating inherent risk, does this translate to a
solid footing for the banking sector to remain resilient in the outlook?
The operating environment is envisaged to remain challenging and
highly uncertain, a situation that makes it diffi cult for banks to assess their
outlook inherent risk.
Adaptive public and investor confi dence in the fi nancial sector have hit
rock bottom, worsened by synergies of signals of uncertainty across other
key sectors of the economy.
More importantly, cost-to-income levels for the banking sector have
remained high, while the major component of income has shifted from
interest income to non-interest income.
There remains a high probability of adverse shocks to this profi t
function, for instance, the somewhat stabilising exchange rate will reduce
exchange valuation gains, while economic slowdown will negatively impact
Makuyana is an economic and investment analyst and also head of research (Invictus
Securities Zimbabwe) Email:mutsmarks@gmail.com,m.makuyana@invictus seurities.
com
26 BANKS& BANKING SURVEY 2020
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