Central Bank of Zimbabwe cancels Capital Bank’s license

The Reserve Bank of Zimbabwe on Thursday announced the cancellation of Capital Bank’s banking license, sowing fresh doubt into the stability of indigenously-owned banks in the country.  Zimbabwe’s financial services sector has been hard-hit by a persistent liquidity crunch and depositor flight, with indigenously owned banks hardest hit.

The cancellation of Capital Bank’s license could stoke further negative sentiment over the stability of the local banking sector.  A report by the Industrial Psychology Consultants released this week established that Zimbabweans favor international banks to handle their funds.

SA’s Standard Bank unit in Zimbabwe, Stanbic, and the British-owned Standard Chartered and Barclays banks were rated as the most favoured international banks by the report. “Only 24 percent of bank customers said they would want to stay with their current banks.”

The main reason given for the license cancellation was that it was under-capitalized.  Capital Bank’s major shareholder, the National Social Security Authority, is no longer willing to inject additional capital into the bank.  The reserve bank went on to say, “The registrar is satisfied with the reasons for the request and that the cancellation will be in the best interests of Capital Bank’s creditors, depositors and members.”

The Central Bank stated, “The bank has been operating in an unsafe and unsound financial condition, characterized by critical under-capitalization, persistent losses, chronic liquidity challenges and inordinately high non-performing loans.”  Capital Bank joins a string of indigenous banks that have failed over the years that included Genesis Bank, Royal Bank and Trust Bank.

Source: BD Live