HARARE — The Reserve Bank of Zimbabwe on Thursday announced the cancellation of Capital Bank’s banking licence, 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 licence 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 favour 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% of bank customers said they would want to stay with their current banks.”
The main reason given for the licence cancellation was undercapitalisation. Capital Bank’s major shareholder, the National Social Security Authority, is no longer willing to inject additional capital into the bank.
“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”, said the reserve bank.
“The bank has been operating in an unsafe and unsound financial condition, characterised by critical undercapitalisation, persistent losses, chronic liquidity challenges and inordinately high non-performing loans,” said the central bank.
Capital Bank joins a string of indigenous banks that have failed over the years that included Genesis Bank, Royal Bank and Trust Bank.