CONTENTS
GOVERNOR’S FOREWORD ...... 3 DEPUTY GOVERNOR’S REMARKS ...... 5 SENIOR DIVISION CHIEF’S PREVIEW ...... 7 CHAPTER 1 ...... 9 ENHANCED SUPERVISORY PRACTICES...... 9 1.1 Licensing Process...... 9 1.2 Risk-Based Supervision ...... 9 1.3 Consolidated Supervision ...... 15 1.4 External Credit Ratings ...... 15 CHAPTER 2 ...... 18 CONDITION AND PERFORMANCE OF THE BANKING SECTOR ...... 18 2.1 Overview...... 18 2.2 Balance Sheet Structure ...... 19 2.3 Performance of Banking Sector ...... 20 2.4 Sectoral Analysis ...... 23 2.5 Asset Management Companies Sector ...... 30 CHAPTER 3 ...... 32 MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION...... 32 3.1 Introduction ...... 32 3.2 Regulatory Developments ...... 32 3.3 Review of Minimum Capital Requirements...... 32 3.4 Licensing Activities for Banking and Non-Bank Financial Institutions ...... 33 3.5 Ongoing Supervision of Banking Institutions and Asset Management Companies ...... 34 3.6 Major On-Site Examination Findings ...... 35 3.7 Supervisory Actions ...... 37 3.8 Compliance and Corporate Governance ...... 38 3.9 Risk Management in the Financial Sector ...... 38 3.10 Microfinance National Task Force...... 39 3.11 Supervision of Other Non Banking Financial Institutions ...... 40 3.12 Strengthening Supervisory Capacity ...... 42 CHAPTER 4 ...... 43 TROUBLED BANK RESOLUTION...... 43 4.1 Introduction ...... 43 4.2 Market Solutions...... 43 4.3 Appeals to The Reserve Bank ...... 45 4.4 Troubled Bank Fund ...... 46 APPENDIX 1 - Balance Sheets of Banks ...... 47 APPENDIX 2 - Income Statements of Banks ...... 53 APPENDIX 3 - Income Statements and Balance Sheets of Asset Management companies ...... 59 APPENDIX 4 - Credit Ratings of Financial Institutions ...... 62 APPENDIX 5 - Registered and Operating Banking Institutions ...... 63 APPENDIX 6 - Banking Institutions Under Curatorship ...... 69 APPENDIX 7 - Registered and Operating Asset Management Companies as at 31 December 2005 ...... 70 APPENDIX 8 - Asset Management Companies closed in 2005 ...... 72 BANK LICENSING, SUPERVISION & SURVEILLANCE DIVISIONAL STRUCTURE ...... 73 PROFILE OF BANK LICENSING, SUPERVISION & SURVEILLANCE (BLSS) ...... 74
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 1 PURPOSE OF THIS REPORT
The purpose of this Annual Report is to provide an analysis of the condition and performance of the banking sector in
Zimbabwe for the year ended 31 December 2005. The report also provides an overview of the supervisory operations and
activities during the period under review. Readers should note that this report is not a statutory requirement, and that it has
been prepared solely for information purposes for the benefit of the Bank’s various stakeholders.
2 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 GOVERNOR’S FOREWORD
Dr. G. Gono The Governor, Chairman of the Board
1. The financial sector remained fundamentally safe invocation has greatly enhanced the supervisory and sound during year 2005. This was underpinned role of the Reserve Bank. It empowers the central by effective regulation and supervision of the bank to oversee other systemically important financial institutions that fall under the jurisdiction institutions such as asset management companies, of the Reserve Bank. building societies, moneylending institutions and the People’s Own Savings Bank, using the same 2. In pursuit of the mandate to promote financial standards as those applied to banking institutions. stability, the Reserve Bank enhanced its various Meanwhile the Reserve Bank continued to engage supervisory practices. other financial sector regulators with a view of introducing formal reporting and prudential 3. On-going supervisory methodologies such as the risk- oversight on other financial sector players. based supervision and consolidated supervision approach were enhanced in line with international 5. As Monetary Authorities, we recognize the vital role best practice. The Reserve Bank has also enhanced the played by the entire financial sector in facilitating licensing framework for asset management companies and supporting the revival of the economy. It was and subsequently issued perpetual licences. noted, however, that most banking institutions abandoned their core financial intermediation role 4. The Minister of Finance invoked section 3(3) of the through which they support industry and Banking Act [Chapter 24:20] in 2005. This commerce, in favour of speculative short-term
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 3 GOVERNOR’S FOREWORD CONTINUED
money market investments. In this regard, there is an imperative need for an effective and efficient financial system that is responsive to the changing economic requirements.
6. I once again wish to underscore the importance of sound corporate governance systems and practices in the financial sector. The Reserve Bank will pursue with vigour banks’ compliance with good corporate governance and the implementation of appropriate risk management practices.
7. Once again, I acknowledge the support of, and take this opportunity to thank all our stakeholders without whose support, our mandate of maintaining financial stability would be difficult to achieve.
Dr. G. Gono Governor
4 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 DEPUTY GOVERNOR’S REMARKS
Dr. C. L. Dhliwayo Deputy Governor
1. During 2005, Bank Licensing, Supervision & companies ended the year well capitalized and the Surveillance Division (BLSS) continued to perform sector again demonstrated resilience in the face of its core activities of licensing, conducting on-site generally unstable economic fundamentals. examinations, off-site surveillance and monitoring compliance with guidelines and regulations. The 3. In line with international best practice, BLSS division did not swerve from its mission of enhanced its risk based supervision process, promoting and maintaining the safety and supervisory policies, procedures and practices in soundness of the financial system through proactive order to provide a dynamic, efficient, structured and and rigorous regulation and supervision in line with risk-oriented prudential supervision framework. The international best practice. risk based supervision approach has since been implemented for all other banking institutions, with 2. The banking sector was generally stable in 2005, effect from the fourth quarter of 2005. with two institutions that were under the management of a curator having their curatorship 4. In an effort to promote the safety and soundness of lifted, bringing the number of operating banking the banking sector, the Reserve Bank directed that institutions to 29. A total of 17 asset management all banking institutions be rated annually, by an companies were issued with perpetual licences after accredited international external credit rating going through a rigorous licensing process. Most agency. By 31 December 2005, 23 banking banking institutions and asset management institutions had been accorded national ratings. The
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 5 DEPUTY GOVERNOR’S REMARKS CONTINUED
Reserve Bank is pleased to note that the banking National Task Force on Microfinance (NTF) to institutions achieved satisfactory ratings. This spearhead the development of an appropriate should go a long way in boosting confidence in the regulatory framework. In order to understand the country’s banking sector. status of and the challenges faced by the microfinance sector the NTF commissioned a 5. The Reserve Bank successfully implemented the national microfinance survey in the last quarter of Bank Supervision Application (BSA) solution, a 2005. system which was developed for the purpose of enabling and supporting an improved bank 8. The findings and recommendations of the survey supervision function in SADC central banks. will feed into the formulation of a national Supervisors are now able to capture all the microfinance policy and a regulatory framework. It information pertaining to financial analysis of is hoped that the microfinance sector will become banking institutions. Furthermore, the BSA has, stronger and poised to take centre stage in the through the automation of workflows and risk provision of financial services to the disadvantaged analysis, facilitated effective risk monitoring in the rural folk of the country. financial sector. 9. In conclusion, I would like, on behalf of the Reserve 6. As part of the Financial Sector Stability program, Bank and the Bank Licensing Supervision & the Reserve Bank introduced stress testing as an Surveillance Division, to express my profound early warning system to enhance the off-site gratitude for the working relationship that exists surveillance process. Stress testing is used as a tool between the financial sector, the various for assessing the resilience of the financial system to stakeholders and the Reserve Bank and I sincerely shocks in various economic factors. The results of hope that the same will continue to prevail. the stress tests indicate that the Zimbabwean financial system is generally resilient to major shocks in the exchange rate, interest rate and other economic variables. Dr. C.L. Dhliwayo Deputy Governor 7. Recognizing the importance of microfinance sector in economic development and the need to develop the sector, the Reserve Bank in conjunction with other microfinance stakeholders, constituted a
6 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005
SENIOR DIVISION CHIEF’S PREVIEW
Mr. N. Mataruka Senior Division Chief, Bank Licensing, Supervision & Surveillance
1. The year 2005 saw the return to normalcy of the has since been applied to other banking financial sector after the tumultuous events of institutions and going forward all bank 2004. This followed timely corrective actions examinations will be undertaken in line with this taken by the Reserve Bank and positive responses framework. to these actions by the banking institutions and asset management companies concerned. 4. The Reserve Bank announced new minimum capital requirements for banking institutions in the 2. Most banking institutions reported significant January 2006 Monetary Policy Review Statement. performance improvements in earnings, asset The increased capital levels which are effective quality and liquidity management in 2005. It was, from 30 September 2006 will enable financial however, noted that there is a general diversion by institutions to underwrite significant business as banking institutions, from traditional lending well as provide adequate cushion against potential activities to money market investments. business losses.
3. Bank Licensing, Supervision & Surveillance 5. Following the successful implementation of Division fully implemented the risk-based market solutions involving curators, shareholders, supervision process and conducted a pilot depositors and creditors, Intermarket Banking examination at one banking institution in the last Corporation Limited, Intermarket Discount quarter of 2005. The refined supervisory approach House Limited and CFX Bank Limited have
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 7 SENIOR DIVISION CHIEF’S PREVIEW CONTINUED
resumed normal banking operations. In addition, National Discount House which had also been experiencing challenges resumed normal operations in February 2006.
6. Looking ahead, BLSS focus will continue to be directed towards strengthening supervisory frameworks through adoption of international best practice and cooperation with other financial regulators in order to consolidate the gains made towards financial stability in 2005.
7. Finally, we take this opportunity to appreciate the efforts and commitment of all our stakeholders during the year under review, as we pursue our regulatory mandate to maintain safety and soundness in the financial system.
N. Mataruka Senior Division Chief
8 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005
CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES
1.1 LICENSING PROCESS submission of adequate information within the given time frames. Applicants are therefore urged 1.1.1 The Reserve Bank has continued to strengthen the to seek advice from their professional advisors licensing framework for financial institutions such as accountants and legal practitioners. under its supervisory purview, in line with international best practice, and in response to Perpetual licences for asset management companies… challenges that have been experienced in the 1.1.6 Following the development of an effective financial sector. prudential supervisory framework for asset management companies in 2004, 17 qualifying 1.1.2 To this end, the Reserve Bank’s licensing criteria institutions were issued with perpetual licences in ensures that new banking institutions have fit and 2005. Going forward any supervisory concerns proper shareholders, financial strength, sound risk will be addressed through ongoing supervision of management systems, an organisational structure the institutions. in line with the institution’s operational activities, and management with sufficient expertise and 1.2 RISK-BASED SUPERVISION integrity to operate the proposed banks in a sound and prudent manner. 1.2.1 Risk-based supervision (RBS) was adopted by the Reserve Bank in 2002. In line with international 1.1.3 In addition, the Reserve Bank has enhanced the trends, the Bank continued to refine the risk based vetting criteria focusing on the fitness and probity supervision process over the years. In 2005, the of those entrusted to run financial institutions. Reserve Bank successfully conducted an all This ensures that financial institutions are run by inclusive pilot risk-based on-site examination and competent people of impeccable integrity. subsequently issued the Risk-Based Supervision Framework. Challenges … 1.1.4 The Reserve Bank has continued to face challenges 1.2.2 Prior to the introduction of risk-based supervision, in its licensing activities relating to inadequate on-site examinations were routine and gave equal and/or incomplete documents and the late emphasis to all areas of a bank regardless of the submission of required information. A large size, complexity and risk profile of the bank. This proportion of applicants, particularly from the process was usually lengthy and resulted in microfinance sector, have demonstrated lack of examinations taking too long to conclude. The understanding of the licensing requirements. major weaknesses of the old approach included the following: 1.1.5 The Reserve Bank will reject applications that do a. the examination plan was not related to the not comply with the licensing criteria including risk profile of a banking institution;
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 9 CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
b. minimum communication with bank Risk-based supervision framework… management in-between examinations; and 1.2.5 The risk-based supervision framework has six key c. focus on financial information and steps, namely understanding the institution, little attention to qualitative assessments. assessing the institution’s risk, planning and scheduling supervisory activities, defining 1.2.3 The risk-based supervision approach emphasises a examination activities, performing on-site thorough understanding of the supervised entity’s examination, and conducting off-site supervision. risk profile and risk management processes. The The diagram below summarises the key steps and scope and intensity of supervision programs and the output for each step. activities are tailored to suit the specific risk
1. Understanding profile of the particular institution. the Institution
Institution profile
1.2.4 The approach provides a number of benefits to Off-site Reports 2. Assessing the Update Institutional supervisors and banking institutions. These Institution’s Risk profile Risk Matrix include: 6. Conducting Of-site Supervision a. enhancing banking institutions’ ability to Risk Assessment Narrative identify, measure, manage, and control risks as Examination Reports 3. Planning & Scheduling well as to correct deficiencies; Supervisory Activities 5. Performing Supervisory Plan One-site b. encouraging frequent, open communications Examination between banking institutions and bank 4. Defining Scope Examination Memorandum examiners; Activities c. enhanced surveillance through the monitoring of new developments and strategic changes at Figure 1.1 Risk-based supervision conceptual framework a given institution throughout the examination cycle; Understanding the institution- Step 1 d. greater emphasis on supervision of banking 1.2.6 This step involves developing an understanding of institutions and areas exhibiting highest risk or the institution’s characteristics and risk profile. adverse trends; e. less examination time spent on banking 1.2.7 The institutional profile provides a concise institutions’ premises; portrait of an institution’s structure and activities, f. improved quality of working papers necessary functional business lines and nature and level of to support examiner’s analysis and risk. It also highlights outstanding past supervisory conclusions; and findings and future prospects. g customised examination reports. 1.2.8 The information used to construct an institutional
10 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005
CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
profile is gathered from various sources ranging 1.2.11 An example of a summarized Risk Matrix is shown from discussions with management, supervisory below. early warning systems, off-site/on-site examination reports, and market intelligence. The institutional Type of Level of Adequacy of Risk Overall Direction of Inherent Inherent Management Composite Overall profile is updated continuously to keep track of Risk Risk Systems Risk Composite Risk significant developments that occur in-between Credit Low Acceptable Low Stable on-site examinations. Liquidity Moderate Acceptable Moderate Stable Interest Rate Moderate Acceptable Moderate Stable Assessing the institution’s risks – Step 2 Foreign 1.2.9 The step requires an assessment of an institution’s Exchange Moderate Acceptable Moderate Increasing risks to ensure effective identification of the Operational High Acceptable Moderate Stable strengths and vulnerabilities of the institution. Risk Legal & assessment directs supervisory effort on those risks Compliance Moderate Acceptable Moderate Stable posing the most severe challenge to the safety and Strategic Low Strong Low Stable soundness of a banking institution. Reputation Moderate Strong Low Increasing
1.2.10 The risk assessment has two outputs, namely a 1.2.12 Risk assessment provides a solid foundation upon Risk Matrix and a Risk Assessment Narrative. A which subsequent on-site examination procedures Risk Matrix identifies, in a tabular format, the are determined. type, level, management, and direction of risk inherent in a bank and forms the basis on which Planning & scheduling supervisory work- Step 3 on-site examinations may be conducted. A Risk 1.2.13 The third step involves the development of a Assessment Narrative describes, in a concise supervisory plan on the basis of supervisory manner, the type and level of inherent risks in a concerns identified from the Risk Matrix and banking institution’s activities, the adequacy of previous examinations. A supervisory plan risk management controls in place, and the trend represents the link between the supervisory of the risk. concerns identified during risk assessment and the supervisory activities to be conducted.
1.2.14 The supervisory plan provides a comprehensive listing of all examination activities to be carried out at the institution. It incorporates the coverage of the examination, and the scope of the review.
Defining examination activities-Step 4 1.2.15 The fourth step involves identification of specific
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 11 CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
areas to be examined and the objectives of the 1.2.20 RAS provides a structured framework for measuring examination. This results in the development of a and assessing risk. It is a method of identifying, scope memorandum which outlines the type and evaluating, documenting, and communicating rationale of the examination, key areas to be assessment of the quantity of risk, the quality of risk inspected and the time and resources allocated for management, and direction of risk. the examination. 1.2.21 For each risk category, the following assessments Performing the on-site examination-Step 5 are made: 1.2.16 The procedures used in conducting the on-site a. Quantity of risk: This is the level or volume of examination are institution specific and risk that exists and is characterized as low, determined by the size, complexity and risk profile moderate, or high. of the bank. The focus is mainly on assessing b. Quality of risk management: This is an management’s ability to identify measure, monitor assessment of the effectiveness of the and control risks. institution’s risk management systems in identifying, measuring, monitoring and 1.2.17 The output of step 5, is an On-site Examination controlling risks. The quality of risk Report. The report details the examination management is characterized as strong, findings on the condition of the institution and acceptable, or weak. Strong risk management any recommended supervisory action required to means that management effectively identifies remedy identified deficiencies. and controls all major types of risk posed by the relevant activity or function. Acceptable 1.2.18 The condition of banking institutions is assessed risk management indicates that a bank’s risk using the CAMELS rating system and the Risk management systems although largely Assessment System (RAS). effective, may be lacking to some degree. Weak risk management indicates that risk 1.2.19 RAS and CAMELS are distinct yet closely related management systems are lacking in important bank evaluation methods. They both provide ways and therefore, are a cause for more than information about a bank’s overall soundness, normal supervisory attention. financial and operational weaknesses or adverse c. Composite risk: This is a reflection of the level trends, problems, and risk management practices. of residual risk after taking into account RAS takes both a current and a prospective view of quality of management of inherent risk. It is a the institution’s risk profile, whereas CAMELS summary judgment about the level of focuses on the condition of the banking institution supervisory concern and is characterized as at a point in time. low, moderate, or high. d. Direction of risk: This is the probable change
12 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
in the particular risk over the next 12 months a it provides a basis for evaluating the condition and is characterized as decreasing, stable, or of banking institutions in-between on-site increasing. Decreasing direction indicates that examinations. based on current information, composite risk b it allows for comparative review and will decline over the next examination cycle. assessment of the banking sector as a whole; Increasing direction denotes anticipation of c it facilitates monitoring of compliance with higher risk over the examination cycle. corrective actions; and d it provides valuable input in formulation of Ongoing off-site supervision-Step 6 economic policies, given the relationship 1.2.22 This step refers to all the supervisory activities that between financial sector soundness and take place in between on-site examinations; macroeconomic policy.
1.2.23 After an on-site examination, the institutional 1.2.27 The off-site surveillance involves regular and at profile, risk assessment narrative, risk matrix and times ad-hoc activities which include the supervisory plan are updated to reflect any following: data collection, preliminary analysis significant examination findings or post and validation, detailed analysis and report writing examination actions (e.g. Corrective Orders); as well as prudential meetings.
1.2.24 On an ongoing basis, off-site surveillance reports 1.2.28 Current policy on prudential meetings with are generated using quantitative and qualitative banking institutions’ management requires that information submitted through regular prudential meetings be held as follows: returns and other sources of reliable information. Off-site surveillance is an early warning CAMELS Composite Frequency of supervisory instrument that is useful in the Rating Prudential Meetings continuous assessment of a banking institution’s 1 Annually condition and the scheduling of onsite 2 Semi-annually examinations. 3 to 5 Quarterly
1.2.25 Further, there is continuous communication with Stress testing… banking institutions that enables examiners to 1.2.29 In order to enhance off-site surveillance process, keep track of significant developments in the the Reserve Bank has introduced stress testing as supervised institutions. part of the early warning system.
1.2.26 Off-site analysis complements on-site 1.2.30 Stress testing is conducted on bank specific and examinations and its major benefits are:- system-wide bases. The risk factors used are
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 13 CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
changes in interest rates, the exchange rate, and 1.2.33 In the case of the hypothetical scenario approach, level of non-performing loans. stress tests may be conducted assuming any of three different levels of scenarios depending on 1.2.31 Reports on the impact of these factors on a the particular institution’s circumstances and banking institution’s earnings and capital are environmental considerations: prepared on a quarterly basis. The reports are a Minor Level Shocks: These represent small useful in anticipating possible challenges and shocks to the risk factors. The level for vulnerabilities in banking institutions. different risk factors can, however, vary; b Moderate Level Shocks: It envisages medium 1.2.32 System-wide stress tests measure the impact of level of shocks, and the level is defined various shocks on financial system stability with separately for each risk factor; and the objective of discovering channels of contagion c Major Level Shocks: It involves significant and identifying institutions that are likely to shocks to all the risk factors and is also defined experience financial distress when subjected to separately for each risk factor. stress scenarios. 1.2.34 The Reserve Bank has also introduced a number of Stress Testing Techniques … models as part of the early warning system to a Simple Sensitivity Analysis: This measures the identify potential problems in banking institutions. change in the value of a portfolio in response The models enable the Reserve Bank to detect to shocks of various degrees to different financial weaknesses and vulnerabilities and to independent risk factors. The underlying take pre-emptive actions to reduce the risks of relationships among the risk factors are not bank failures and crises. considered. b Scenario Analysis: It evaluates the impact on 1.2.35 The following early warning models have been the value of a portfolio where a change in one implemented by the Reserve Bank: risk factor affects a number of other risk a Probit / Logit Regression Models: The models factors or there is a simultaneous move in a are used to predict ratings in each of the group of risk factors. Scenarios can be CAMELS components and the overall rating designed to encompass both movements in a for a banking institution; group of risk factors and the changes in the b Financial Soundness Indicators (FSI) forecasting underlying relationships between these models: These use time series models to variables. Stress testing can be based on forecast the capital adequacy ratio (CAR) in the historical scenarios (a backward looking next quarter given the current FSI; approach), or a hypothetical scenario (a c Merton’s Contingency Claim Analysis Model: forward-looking approach). The model is used to measure the probability
14 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
of an institution becoming insolvent within a 1.3.4 Consolidated supervision complements risk-based given time frame; and supervision in the determination of the risk profile d Inter-bank Contagion Model: The model is of a banking institution which is part of a banking useful in determining how interbank group. contagion may be transmitted through the banking system as a result of interbank 1.4 EXTERNAL CREDIT RATINGS exposures and linkages. 1.4.1 In line with international best practice and global 1.3 CONSOLIDATED SUPERVISION trends, all banking institutions were required with effect from 1 January 2005 to obtain credit ratings 1.3.1 Over the years, the Zimbabwean financial sector annually from accredited rating agencies. Banking has witnessed the formation of a number of institutions were encouraged to prime their financial groups incorporating banking and non- operations and systems for this critical bank financial institutions. Financial requirement, which enhances the scope for easier conglomeration increases the potential for comparison between local financial institutions regulatory arbitrage, contagion, moral hazard, and their international counterparties. lack of transparency, conflicts of interest and abuse of economic power. 1.4.2 Registered banking institutions which form part of a banking group are assigned individual ratings 1.3.2 In order to control the risks associated with over and above a composite rating at the bank financial conglomerates, the Reserve Bank has holding company level. adopted the consolidated supervision approach to banking supervision which seeks to evaluate the Role of External Credit Ratings… strength of individual banking institutions and the 1.4.3 Credit Rating Agencies (CRAs) play an important entire banking group taking into account all the role in reducing information asymmetry between risks which may affect an institution regardless of banking institutions and depositors, bridging the whether these risks are carried in the books of the information gap between issuers and investors, bank or related entities. providing a common yardstick for measuring credit risk, and performing a 1.3.3 In cases where there are cross-border operations, monitoring/surveillance function for investors. consolidated supervision facilitates the effective assessment of the solvency and stability of local 1.4.4 Credit ratings are complementary to the Reserve and foreign establishments. Bank’s regulatory efforts of promoting financial stability and protecting the interests of investors, creditors and depositors. They promote market
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 15 CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
discipline which facilitates the enhancement of Table 1.1: Short term debt rating scale corporate governance and risk management High Grade systems of the assessed institutions. A1+ Highest certainty of timely payment. Short-term liquidity, including internal operating factors Credit Rating… and/or access to alternative sources of funds is 1.4.5 Global Credit Rating Company (GCR) was outstanding, and safety is just below that of risk- accredited in 2004, to perform credit ratings on free treasury bills. banking institutions operating in Zimbabwe. A1 Very high certainty of timely payment. Liquidity Currently GCR is the only accredited rating factors are excellent and supported by good agency. The company uses two types of rating: fundamental protection factors. Risk factors are a international rating scale; and minor. b national rating scale. A1- High certainty of timely payment. Liquidity factors are strong and supported by good 1.4.6 International rating scale measures the ability of fundamental protection factors. Risk factors are an organisation to service foreign currency very small. obligations. The national ratings are designed to Good Grade give an indication of the risks within a specific A2 Good certainty of timely payment. Liquidity country. Banking institutions in Zimbabwe have factors and company fundamentals are sound. been assessed using GCR’s national scale ratings. Although ongoing funding needs may enlarge In this regard, banks were assigned short term and total financing requirements, access to capital long term ratings (see Appendix 4). markets is good. Risk factors are small.
1.4.7 A short-term debt rating rates an organisation's Satisfactory Grade creditworthiness on unsecured credit over the A3 Satisfactory liquidity and other protection factors short-term. Such a rating provides an indication qualify issues as to investment grade. However, of the probability of default on any unsecured risk factors are larger and subject to more short-term borrowings. variation. Non-Investment Grade 1.4.8 The short-term ratings scale is defined as in the B Speculative investment characteristics. Liquidity table below: is not sufficient to insure against disruption in debt service. Operating factors and market access may be subject to a high degree of variation.
Default C Issuer failed to meet scheduled principal or interest payments.
16 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER ONE - ENHANCED SUPERVISORY APPROACHES CONTINUED
1.4.9 Long-term ratings reflect the probability of default on to economic cycles, industry conditions and/or specific long term debt instruments over the life of the issue. company fortunes.
1.4.10 The long-term rating scale used by GCR is defined CCC Well below investment grade securities. in the table below: Considerable uncertainty exists as to timely payment of principal or interest. Protection Table 1.2: Long term debt rating scale factors are narrow and risk can be substantial with unfavourable economic/industry conditions, Investment Grade and/or with unfavourable company Highest credit quality. The risk factors are AAA developments. negligible, being only slightly more than for risk free government bonds. DD Defaulted debt obligations. Issuer failed to meet AA+ Very high credit quality. Protection factors are scheduled principal and/or Interest payments. AA very strong. Adverse changes in business, AA- economic or financial conditions would increase 1.4.11 Most banking institutions were considered to have investment risk although not significantly. a satisfactory short-term rating. The long-term rating has been generally in the high credit quality. A+ High credit quality. Protection factors are good. A However, risk factors are more variable and A- greater in periods of economic stress.
BBB+ Adequate protection factors and considered BBB sufficient for prudent investment. However, BBB- there is considerable variability in risk during economic cycles.
Non - Investment Grade BB+ Below investment grade but capacity for timely BB repayment exists. Present or prospective financial BB- protection factors fluctuate according to industry conditions or company fortunes. Overall quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that B obligations will not be met when due. Financial B- protection factors will fluctuate widely according
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 17 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR
2.1 OVERVIEW 2.1.6 The macroeconomic environment, which is characterised by high interest rates and rising 2.1.1 The number of operating banking institutions inflation, has resulted in cost constraints, high cost remained at 29 following the licensing of of funding, reduced clients’ capacity to repay loans Zimbabwe Allied Banking Group (ZABG) in and high levels of non performing loans leading to January 2005. Intermarket Discount House and in-duplum challenges. Intermarket Banking Corporation had their curatorship lifted on 31 December 2005. Key success factors… 2.1.7 Key success factors for the banking sector include: 2.1.2 As at 31 December 2005, the banking sector strong risk management practices; adequate comprised twelve (12) commercial banks, five (5) capitalization; robust management information merchant banks, six (4) discount houses, four (4) systems and accounting systems; effective early finance houses and four (4) building societies. warning systems, cost containment, as well as quality service delivery. 2.1.3 The financial sector has demonstrated remarkable resilience to the prevailing harsh macroeconomic 2.1.8 Adequate capitalization is arguably the most environment. Concerted efforts by the Reserve critical success factor for banking institutions. Bank to ensure adoption of sound risk There is need for banks to attract shareholders management systems and corporate governance with an ability to provide financial support on an standards, coupled with positive responsiveness by ongoing basis. the banking institutions have resulted in a significant improvement in the manner banking 2.1.9 There is need for banks to continuously focus on institutions conduct their business. strategic management issues in order to create a competitive edge in an increasingly competitive Challenges… and unstable environment. In some instances, 2.1.4 The need to maintain capital adequacy and remain strategic imperatives call for mergers and competitive locally and internationally remains a acquisitions and in this regard the Reserve Bank has major challenge for the banking sector. Banking been encouraging consolidations in the market. institutions require among other strategies, a more refined balance between cost containment policies 2.1.10 Another success factor is the nature and size of the and revenue generation. corporate structure of banking institutions. Some institutions have enlarged their structures to suit 2.1.5 Against this background, shareholders are their long-term strategies, while other institutions expected to implement strategies that will enable have rationalized their operations through their institutions to comply with the new capital divisionalisations. requirements, effective 30 September 2006.
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Outlook… Fig 2.1: Growth of Total Banking Sector Assets 2.1.11 The general outlook for the banking sector is 120 500 positive based on expectations of sustainable 450 100 400 economic growth, enhanced market discipline, 80 350 300 strengthening of risk management and corporate 60 250
Z$ trillions 200 Percentage (%) governance practices by banking institutions. 40 150 20 100 50 0 0 2.1.12 Consolidations resulting from bank and banking 2002 2003 2004 2005
groups’ recapitalisation programs are expected to To ta l A s s e t s (Z$ b ) Growth rate (%) lead to strongly capitalized banking institutions. Recapitalisation programs are also expected to 2.2.4 The composition of assets for the period under attract foreign strategic partners for some banking review is highlighted in Table 2.1 below: institutions. Table 2.1: Composition of Assets as at 31 December 2005 2.2 BALANCE SHEET STRUCTURE DEC 2004 DEC 2005 Assets Z$ % to total Z$ % to total Composition of Assets… trillion assets trillion assets 2.2.1 Total assets of the banking sector were $105.15 Cash and due from banks 1.26 6.35% 4.77 4.54% trillion as at 31 December 2005, up from $19.85 Balances with RBZ 3.57 17.98% 16.03 15.24% trillion as at 31 December 2004. This sharp Foreign claims 0.88 4.43% 15.43 14.68% nominal increase is attributed to investments and Securities & investments 5.23 26.35% 30.46 28.97% securities which increased by 482.49% over the Loans and advances 4.76 23.98% 15.22 14.47% year, and growth in loans influenced by Fixed assets 0.50 2.52% 5.41 5.14% disbursements of $5.59 trillion, under the Other assets 1.59 8.01% 9.23 8.78% Agricultural Sector Productivity Enhancement Off-balance sheet items 2.06 10.38% 8.61 8.18% Facility (ASPEF). Total Assets 19.85 100.00% 105.15 100.00%
2.2.2 Assets in the banking sector were heavily 2.2.5 As at 31 December 2005, on-balance sheet assets concentrated in a few commercial banks. The top amounted to $96.55 trillion as compared to five banks accounted for 62.03% of the total $17.79 trillion recorded in 2004, representing a banking sector assets. growth rate of 442.72%. Off-balance sheet assets increased by 317.96% from $2.06 trillion in 2004 2.2.3 Figure 2.1 depicts the increase in banking sector to $8.61 trillion in 2005. The growth in the total assets from December 2002 to December banking sector assets is also partly reflective of 2005. high inflation which closed the year at 585%.
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 19 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
2.2.6 The increase in investments and securities was a 2.2.10 The proportion of capital and reserves remained response to the high interest rates which prevailed in relatively stable at 13.71% as at 31 December 2005 2005. This resulted in banking institutions compared to 12.04% as at 31 December 2004. concentrating on investments in relatively low risk assets compared to lending activities which were 2.2.11 Demand deposits, which include both domestic rather prohibitive due to the high cost of borrowing. and foreign, continued to form the bulk of the deposit base as shown in Table 2.3 below: 2.2.7 The above scenario led to a discernible shift over the year by banking institutions from their core Table 2.3: Percentage of total deposits business of financial intermediation. Despite an increase in loans and advances from $5.42 trillion Deposit Dec 2004 Dec 2005 to $16.73 trillion during the period under review, Demand 49.35% 44.41% the proportion of loans and advances to total Savings 12.92% 11.87% assets decreased from 23.98% in 2004 to 14.47% Time 23.58% 20.10% as at 31 December 2005. FCA 10.46% 22.75% NCD’s 3.69% 0.87% Composition of liabilities... Total 100.00% 100.00% 2.2.8 Total deposits increased from $8.24 trillion as at 31 December 2004 to $53.82 trillion as at 31 December 2.2.12 The increase in the proportion of foreign currency 2005 and constituted 51.19% of total liabilities. deposits to total deposits from 10.46% as at 31 December 2004 to 22.75% as at 31 December 2.2.9 The composition of liabilities in the banking sector 2005 is partly due to the introduction of the is shown in Table 2.2 below: Tradable Foreign Currency Balance System in October 2005 and significant depreciation of the Table 2.2: Composition of liabilities as at 31 December 2005 local currency, during the period under review.
Dec 2004 Dec 2005 2.3 PERFORMANCE OF BANKING SECTOR Assets Z$ % to total Z$ % to total trillion liabilities trillion liabilities Capital adequacy… Total Deposits 8.24 41.46% 53.82 51.19% 2.3.1 Capital and reserves amounted to $14.42 trillion Due to RBZ 1.62 8.16% 4.60 4.38% as at 31 December 2005 up from $2.39 trillion as Due to Financial Institutions 1.20 6.05% 2.72 2.59% at 31 December 2004. The increase was largely Foreign Liabilities 0.58 2.92% 3.38 3.21% attributed to growth in retained earnings and Capital and Reserves 2.39 12.04% 14.42 13.71% isolated capital injection through rights issue. Other Liabilities 3.76 18.94% 17.55 16.69% Off-balance sheet items 2.07 10.43% 8.66 8.23% Total Liabilities 19.85 100.00% 105.15 100.00%
20 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
2.3.2 The average capital adequacy ratio (CAR) for the Profitability… banking sector was 38.41% as at 31 December 2.3.6 The profitability of the banking sector improved 2005, compared to 54.18% in December 2004. during the year 2005, as measured by return on The decline in the ratio is partly a reflection of the assets which increased from 8.1% in 2004 to introduction of capital charges for market and 11.91% in 2005. The cost-to-income ratio operational risks. Only one banking institution declined from 59.40% in 2004 to 46.66% in 2005 had capital adequacy ratio below the minimum despite inflationary pressures. This was achieved requirement of 10% as at 31 December 2005. through cost containment measures indicating rationalisation of branches and retrenchments. Asset Quality… 2.3.3 Loans and advances increased by 219.75% from 2.3.7 Figure 2.3 below shows the banking sector’s $4.76 billion as at 31 December 2004 to $15.22 profitability indicators from December 2003 to billion as at 31 December 2005, representing December 2005. 14.47% of the banking sector aggregate assets. Fig 2.3: Banking Sector - Profitability Indicators
100.00% 91.17% 2.3.4 The quality of the banking sector assets improved 90.00% 80.00% 69.86% 70.70% in 2005 as reflected by the decrease in the ratio of 70.00% 60.83% 59.40% 60.00% adversely classified loans to total loans, from 50.00% 46.66%
40.00% 33.31%31.16% 30.00%
18.52% as at 31 December 2004, to 8.74% as at Percentage (%) 20.00% 11.91% 15.85% 8.10% 31 December 2005 as shown in Figure 2.2 below. 10.00% 6.54% 0.00% Return on Assets Return on Equity Net Interest Margin Cost/Income
2003 2004 2005 Fig 2.2: Banking Sector - Assets Quality Indicators
18000 16725 25.00% 16000 20.95% 14000 20.00% 2.3.8 Total income for the banking sector increased by 17.80% 11628 12000 18.52% 15.19% 15.00% 10000 377.98% from $7.72 trillion in 2004 to $36.90 7225 8000 6554 $bn 5660 10.00% 6000 8.74% trillion in 2005. Loans and leases contributed Percentage (%) 4000 5.00% 2000 25.72% of total interest income in 2005 down 0 0.00% Dec 04 Mar 05 Jun 05 Sept 05 Dec 05 from 36.5% in 2004 while securities and Total Loans ACL/TL investments contributed 71.90% in 2005 up from 42.10% in 2004 as shown in Figure 2.4 below. 2.3.5 The decrease in the adversely classified loans to total loans is largely attributable to a shift in the composition of the balance sheet from loans and advances to securities and investments. Further, banks have also limited their lending activities to concessionary lending such as ASPEF.
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 21 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
Fig 2.4: Banking Sector - Income Mix, 2004 - 2005 Figure 2.5(b): Total Expenses Mix- December 2005 56.59% 60.00% 15.4% 42.10% 42.7% 50.00% 36.50% 40.00%
30.00% 20.24% 21.27% 21.6% 12.20% Percentage 20.00% 9.24% 11.9% 8.4% 10.00% 1.90%
0.00% Interest on Deposits 2004 2005 Interest on Borrowed Funds Interest from Securites & Inv. Interest on Loans & Leases Other Interest Exp. Non-interest Income Other Interest Income Salaries & Employee Benefits Admin & Other Expenses 2.3.9 The growth in contribution of non-interest income to total income was due to a 615.45% increase in Liquidity and Funds Management… foreign exchange fees and commission, from 2.3.11 As at 31 December 2005, the ratio of short term $245.77 billion in 2004 to $1.76 trillion in 2005. assets to short term liabilities (liquidity ratio) for This is attributed to the change in the foreign the banking sector was 92.78%, compared to a exchange management system following the ratio of 83.90% as at 31 December 2005. This introduction of the Tradable Foreign Currency increase was mainly due to hyperinflation which Balance System in October 2005. discouraged lending resulting in a higher proportion of short-term securities and 2.3.10 Total expenses grew by 339.40% from $4.62 investments in the asset mix. trillion in 2004 to $20.30 trillion in 2005. The changes in the composition of total expenses for 2.3.12 The liquidity ratio for the banking sector for the the banking sector during the period 2004 and period 2003 to 2005 is depicted in Figure 2.6 below: 2005 are shown in Figure 2.5(a) and 2.5(b) below.
Figure 2.6: Prudential Liquidity Ratio, 2003 - 2005
Figure 2.5(a): Total Expenses Mix- 140% December 2004 126.09% 120% 106.71% 16.2% 93.89% 95.40% 100% 82.99% 85.14% 86.20% 21.2% 38.7% 81.86% 80.01% 80% 60.71% 72.96% 63.35% 66.23% 60% 58.46%
Percentage (%) 40% 33.76%
12.1% 11.9% 20% 0% Interest on Deposits Interest on Borrowed Funds Building Commercial Dis count Finance Merchant
Other Interest Exp. Salaries & EmployeeBenefits Societies Banks Houses Houses Banks
Admin & Other Expenses 2003 2004 2005
22 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
2.4 SECTORAL ANALYSIS 544.99% from $6.89 trillion as at 31 December 2004 to $44.44 trillion as at 31 December 2005. Commercial Banks Changes in the deposit mix between 2004 and 2.4.1 There were twelve (12) commercial banks operating 2005 are shown in Figure 2.8 below. in Zimbabwe as at 31 December 2005. Figure 2.8: Commercial Banks - Deposits Mix, 2004 - 2005
Total Assets… 2005 2.4.2 Total assets for commercial banks increased by 411.80% from $16.87 trillion as at 31 December 2004 to $86.34 trillion as at 31 December 2005. 2004 The growth was in line with the levels of inflation
and the disbursements made through concessional Percentage (%)
financing under Agriculture Sector Productivity Demand Deposits Savings Deposits Time Deposits FCA Deposits NCD's Enhancement Facility (ASPEF) and other export and productive sector facilities. 2.4.6 Although relatively cheap deposits (demand and savings) increased by 492.22% from $4.63 trillion 2.4.3 Figure 2.7 below shows a comparative asset mix for in 2004 to $27.42 trillion in 2005, their commercial banks as at 31 December 2004 and 2005. contribution to total deposits decreased from 67.20% to 61.70% over the same period. Figure 2.7: Commercial Banks - Composition of Assets, 2004 - 2005 2.4.7 A change in foreign exchange policy in the last 2005 quarter of 2005 revived foreign currency trading and FCA deposits increased by 1 353% from $820.47 2004 billion in 2004 to $11.92 trillion in 2005. This
Percentage (%) boosted the contribution of FCA deposits to total
Cash & Due from Banks Balances with RBZ Foreign Claims deposits from 11.90% in 2004 to 26.83% in 2005. Securities & Investments Net Loans & Leases Fixed Assets Other Assets Off-balance Sheet 2.4.8 There has been a notable trend towards low 2.4.4 Foreign claims increased due to the depreciation of intermediation levels, as commercial banks shifted the local currency. The reduction in loans and from traditional lending business to the low risk advances is attributed to the shift by commercial money market investments. The intermediation banks to money market investments during the year. ratio declined from 63.2% in 2004 to 33.47% in 2005. Commercial banks invested a greater Total Liabilities… proportion of the deposits in the money market as 2.4.5 Despite the unfavourable economic environment most clients had no capacity to borrow at high that prevailed in 2005 total deposits increased by interest rates.
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 23 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
Capital Adequacy… Earnings… 2.4.9 Net capital base for the sub-sector increased from 2.4.14 The sub-sector remained fairly profitable $2.2 trillion in December 2004 to $11.09 trillion in recording increased return on equity and assets. December 2005, spurred by growth in retained Return on assets increased from 9.02% in earnings and capital injections to meet minimum December 2004 to 11.08% in December 2005 as capital requirements. All except one of the shown in Figure 2.9 below. commercial banks had surpassed the minimum capital requirement of $100 billion as at 31 December 2005. Fig 2.9: Commercial Banks-key earnings indicators Figure 2.9: Commercial Banks - Key Earnings Indicators
100.00% 2.4.10 The average capital adequacy ratio for the sub- 80.00% sector was 25.82%. Only one bank had a capital 60.00%
adequacy ratio below the minimum requirement 40.00%
of 10%. 20.00% Percentage (%) 0.00% Return on Net Interest Cost to Inc ome Return on Equity Asset Quality… Assets Mar gin Ratio Dec-03 6.59% 94.60% 16.03% 68.42% 2.4.11 The sub-sector had total loans of $14.88 trillion as Dec-04 9.02% 74.28% 37.79% 54.48% at 31 December 2005, an increase of 211.95% Dec-05 11.08% 69.53% 40.66% 40.53% from $4.77 trillion as at 31 December 2004. This nominal growth in loans is reflective of the impact 2.4.15 Cost to income ratio for the sub-sector improved of inflation on borrowers’ funding needs. from 54.48% in 2004 to 40.54% in 2005. The decrease in the cost to income ratio was reflective 2.4.12 There was a marked improvement in asset quality of effective cost containment strategies for the sub-sector as reflected by the decline in implemented by most commercial banks. adversely classified loans to total loans ratio, from 28.9% in December 2004 to 10.42% in December 2.4.16 Income for the sub-sector was inclined towards 2005. The decline in adversely classified loans is income from securities and investments, which attributed to the low intermediation ratio as well constituted 54.54% of total income for the sub- as utilisation of concessional facilities. sector. The income mix for the sub-sector is indicated below:
2.4.13 The proportion of loans for the sub-sector Figure 2.10: Commercial Banks - Income Mix, 2005
7.16% remained stable at 88.94% of total loans for the 8.37% 23.84% banking sector, as at 31 December 2005 compared 6.08% to 88.1% as at 31 December 2004.
54.54%
Income from Loans & Advances Income on Investments and Securities
Foreign Exchange Fees and Commission
Other Non Interest Income
24 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
Liquidity and Funds Management… Figure 2.11: Merchant Banks - Composition of Assets - 2004 & 2005 2.4.17 The liquidity ratio of 95.4% as at 31 December 2005 2005 up from 55.31% as at 31 December 2004 is a reflection of the low intermediation levels
alluded to earlier. Most of the commercial banks’ 2004 assets were invested in short term securities and Percentage (%) investments. Cash & Due from Banks Balances with RBZ Foreign Claims Securities & Investments Net Loans & Leases Fixed Assets Other Assets Off-balance Sheet Merchant Banks 2.4.18 There were five (5) merchant banks operating in Capital Adequacy… the sub-sector as at 31 December 2005. This is the 2.4.21 The sub-sector was adequately capitalised with second largest sub-sector after commercial banks average capital adequacy and tier 1 ratios of with a market share of 7.80% of banking sector 19.85% and 11.69% respectively as at 31 total assets. December 2005. The ratios, however, declined from 33.97% and 26.90% as at 31 December Total Assets… 2004, a reflection of the new regulatory 2.4.19 The sub-sector recorded total assets amounting to requirements to allocate capital for market and $8.20 trillion as at 31 December 2005, operational risk. representing an increase of 435.95% from $1.53 trillion as at 31 December 2004. Asset Quality… 2.4.22 Loans and advances for the sub-sector amounted 2.4.20 The bulk of the total assets were securities and to $871.56 billion as at 31 December 2005, investments, which accounted for 52.82% as at 31 representing an increase of 125.27% from December 2005 up from 39.68% of total assets as $386.90 billion in December 2004. at 31 December 2004 as shown on Figure 2.11 below. The proportion of loans and advances to 2.4.23 The adversely classified loans to total loans ratio total assets declined from 24.53% to 9.83% over remained largely unchanged at 8.56% as at 31 the same period reflecting a shift from lending to December 2005, compared to 8.66% in the increased money market trading. Merchant banks previous year. adopted a cautious approach to lending due to the prevailing high interest rates and largely restricted 2.4.24 The loans to deposit ratio decreased to 25.28% in themselves to concessionary lending under the December 2005 from 74.02% in December 2004 ASPEF program. indicating the shift from lending.
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 25 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
Earnings… Liquidity and Funds Management… 2.4.25 The sub-sector remained profitable with all 2.4.28 The sub-sector’s liquidity ratio increased from merchant banks recording profits. Net income 86.20% to 110.02% which was above the banking increased by 857.80% from $56.97 billion for the sector average of 105.99%. year ended 31 December 2004 to $545.66 billion for the year ended 31 December 2005. The return 2.4.29 The merchant banks’ deposit base increased by on assets remained largely unchanged at 6.56% 576.47% from $510 billion as at 31 December over the same period as depicted below. 2004 to $3.45 trillion as at 31 December 2005 due to inflation and an ability to mobilize deposits Figure 2.12: Merchant Banks - Key Earnings Indicators by the sub-sector. 140.00%
120.00% Discount Houses 100.00% 2.4.30 There were four (4) discount houses operating in 80.00%
60.00% the sub-sector in 2005. Their total assets Percentage (%) 40.00% constituted 1.18% of total assets of the banking
20.00% sector, making it the smallest sub-sector.
0.00% ROA ROE NIM Cost/Income 2003 6.82% 135.89% 17.79% 65.82% Capital Adequacy… 2004 6.18% 77.96% 18.31% 74.55% 2005 6.56% 64.93% 10.78% 46.77% 2.4.31 As at 31 December 2005, the average capital adequacy ratio for the sub-sector was 58.16% 2.4.26 Operational efficiency improved in the sub-sector as down from 87.47% in 2004, with all discount reflected by an improvement in the cost to income houses recording ratios above the prescribed ratio from 74.55% to 46.77% over the review minima. period. The decline is attributed to cost containment measures which included staff rationalisation. 2.4.32 The decline in the capital adequacy ratio was largely attributed to the new regulatory requirement for 2.4.27 The income mix of the sub-sector was skewed the allocation of capital for market and operational towards income from securities and investments risk introduced during 2005. during 2005 as reflected in Figure 2.13 below.
Figure 2.13: Merchant Banks - Income Mix, 2005 Asset Quality… 2.4.33 Total assets for the sub-sector increased by 4.29% 6.07% 20.41% 123.96% from $537.67 billion for the year ending 31 December 2004, to $1.24 trillion for the year 69.23% ending 31 December 2005.
Income from Loans & Advances Income on Securities & Investments Other Income Fees & Commission
26 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
2.4.34 In line with the discount house business, securities Liquidity and Funds Management … and investments continued to dominate the 2.4.37 Total deposits for the sub-sector increased 8.4 balance sheet, constituting 70.18% of the total times from $35.68 billion as at 31 December 2004 assets, compared to 55.24% in the previous year. to $300.04 billion representing 0.56% of the total banking sector’s deposits. Earnings… 2.4.35 The sub-sector posted a net income of $286.16 Finance Houses billion for the year ended 31 December 2005 2.4.38 There were four (4) operating finance houses in compared to a net loss of $16.89 billion realised in 2005. The sub-sector held 1.51% of the total the previous year. Investments and securities banking sector assets in 2005. contributed 86.55% of the total income for the year ended 31 December 2005, being a slight Total Assets… decrease from 76.80% achieved in 2004. 2.4.39 Total assets increased by 476.09% during the period under review from $275.88 billion as at 31 Figure 2.14: Discount Houses - Income Mix, 2005 December 2004 to $1.59 trillion as at 31 December 2005. 0.01% 13.44%
2.4.40 Securities and investments contributed 43.73%, while loans and advances accounted for 8.35% of the total assets. The adverse economic 86.55% environment characterised by high interest and Other Income Non Interest Income Income on Investments and Securities inflation rates, which prevailed in 2005, resulted in reduced demand for lease and hire purchase related 2.4.36 The cost-to-income ratio improved from 82.75% products. The asset distribution for the sub-sector as at 31 December 2004 to 27.79% as at 31 as at 31 December 2005 is shown below: December 2005 reflecting implementation of cost
containment measures in the sub-sector which Figure 2.16: Finance Houses - Asset Mix, 2005 included staff rationalization. 1.73% 9.96% 4.37% 7.86%
Figure 2.15: Discount Houses - Key Earnings Indicators 33.01% 90.00% 81.54%82.75% 77.73% 80.00% 74.80% 70.00% 67.09% 43.07% 60.00% 54.23% 50.00% Balances With the RBZ 40.54% 40.00% Balances With Domestic Banking Institutions 30.00% 28.77% 27.79% Percentage (%) Securities And Investments 20.00% 9.91% 9.16% Loans, Advances and Leases 10.00% 5.20% 0.00% Fixed Assets Re t ur n o n Return on Equity NetInterest Cost/income Other Assets Assets Margin
2003 2004 2005
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 27 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
Capital Adequacy… Earnings… 2.4.41 All finance houses were adequately capitalized as 2.4.45 The sub-sector’s profitability levels increased at 31 December 2005. However, the average during the period under review, as evidenced by capital adequacy ratio for the sub-sector declined the increase in return on assets from negative from 76.44% as at 31 December 2004 to 26.59%. 2.72% in December 2004 to a positive 5.82% as at 31 December 2005. The improved profitability 2.4.42 The net capital base for the sub-sector increased by was mainly driven by interest earned on treasury 637.45% from $31 billion as at 31 December bills reflecting a strategic shift from the core 2004 to $228.61 billion by the end of December business of lending as indicated below: 2005. The capital growth was attributed to retained earnings. Figure 2.18: Finance Houses - Income Mix, 2005
12.32%
Asset Quality… 10.46% 2.4.43 Finance houses had total loans of $161.02 billion 68.77%
as at 31 December 2005 representing an increase 8.45% of 243.33% from $46.90 billion as at 31 December 2004. Balances w ith banks Loans and leases Non Interest Income Investments and Securities
Figure 2.17: Finance Houses - Asset Quality Indicators 180 50% 2.4.46 Return on equity and net interest margin increased 160 45% 140 40% 120 35% from (32.73%) and 8.26% in 2004 to 41.70% and 30% 100 25% 80 22.19% in 2005, respectively as shown in Figure 20% 60 15% 40 10% 2.18 below. Cost to income ratio improved from 20 5% 0 0% 92.3% to 75.64% during the same period. The 'Dec-04 'Mar-05 'Jun-05 'Sept-05 'Dec-05 improvement was largely due to increased income Total Loans ACL/TL flows from recoveries aforementioned.
2.4.44 As indicated in Figure 2.17 above, the quality of Figure 2.19: Finance Houses - Earnings Indicators
100.00% the loan portfolio improved during the year under 92.25% 86.57% 84.28% review as reflected by a decrease in the adversely 80.00% 75.64% 60.00%
classified loans to total loans ratio (ACL/TL) from 40.00% 41.70% 22.19% 20.00% 12.55% 42.93% as at 31 December 2004 to 16.87% as at 5.40% 5.82% 8.26% 0.00%
Percentage (%) -2.72% 31 December 2005. This was largely due to -20.00% -32.73% enhanced recovery efforts and the shift to money -40.00% Return on Assets Return on Equity Net Interest Margin Cost to Income Ratio market investments. 2003 2004 2005
28 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
Liquidity and Funds Management… 2.4.52 The proportion of mortgage loans to total assets 2.4.47 Operations of finance houses were funded mainly declined significantly from 22.28% in 2004 to by time deposits which constituted 66.64% of 10.16% in 2005. This was despite the Reserve total liabilities as at 31 December 2005. Bank having established a National Housing Fund (NHF), which was accessible to all building Building Societies societies for on lending for construction of new 2.4.48 There were four (4) building societies operating in housing units in the high and medium densities of 2005 with a market share of 7.40% in terms of the country’s cities. total assets for the banking sector as at 31 December 2005. 2.4.53 The societies cited high interest rates as the main reason for their inability to extend significant Total Assets… mortgage loans. 2.4.49 Total assets increased from $948.11 billion as at 31 December 2004 to $7.78 trillion as at 31 2.4.54 The shift towards non-core business, investments and December 2005. The growth was attributable to securities, resulted in a decline in the sector’s total increased investments in the money market. loans to total deposits ratio from 33.3% in December 2004 to 17.80% in December 2005. 2.4.50 As was the case with other segments of the banking sector, there was a discernible shift to Capital Adequacy… money market investments at the expense of 2.4.55 All building societies had capital adequacy ratios traditional mortgage lending. above the prudential minimum capital ratio of 10% with an industry average of 58.27%. 2.4.51 The asset mix for building societies for the years However, this was a decline from 70.18% ended 31 December 2004 and 2005 is shown in reported in December 2004. Figure 2.20. Asset Quality… 2.4.56 Total loans for the sub-sector amounted to Figure 2.20: Building Societies - Assets Mix, 2004 & 2005 $805.22 billion in December 2005, up from 2005 $211.19 billion in 2004. Asset quality of the societies was considered satisfactory during the year under review. The ratio of adversely 2004 classified loans to total loans decreased from Percentage (%) 4.56% as at 31 December 2004 compared to
Cash8.83% & Due from Banks Balances with RBZ Securities & Investments Net Loans & Leases Fixed Assets Other Assets 3.85% as at 31 December 2005.
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 29 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
2.4.57 The decline was reflective of the sector’s general 2.5 ASSET MANAGEMENT COMPANIES SECTOR aversion to credit risk under the adverse economic 2.5.1 The asset management sector comprised 18 environment characterized by high inflation and operating institutions with total proprietary assets interest rates. of $643.57 billion and managed $86.07 trillion on behalf of clients, as at 31 December 2005. This Earnings… compares with 31 asset management companies 2.4.58 The earnings performance of the sub-sector was (AMC’s) that were operating at the end of satisfactory during the year under review. The December 2004, with proprietary assets of $166.43 average return on assets and return on equity billion and managed assets of $6.12 trillion. ratios increased from 6.27% and 32.69% to 10.30% and 34.75% respectively during the year 2.5.2 On-site examinations conducted by the Reserve under review. Net interest margin increased from Bank on asset management companies in 2005 21.37% in 2004 to 27.71% in 2005, while cost-to- revealed that some were financially unsound, income ratio improved from 71.45% to 54.79% failing to generate meaningful business, engaging due to effective cost containment strategies. in non-permissible activities and misusing clients’ funds. As a result, the Reserve Bank revoked 2.4.59 The income mix for the sub-sector was skewed licences of thirteen (13) AMCs during the year and towards investments and securities which one in March 2006. accounted for 69,59% of the total income as depicted in Figure 2.21 below. Capital Adequacy… 2.5.3 Aggregate capital base for the sector was $380.42 Figure 2.21: Building Societies - Income Mix 2005 billion as at 31 December 2005, compared to 16% 10% 5% $62.46 billion as at 31 December 2004 representing a 509.06% growth.
2.5.4 The increase in the capital levels was largely
69% attributed to growth in retained earnings as shown Interest income from loans in the graph below: Interest income from investments & securities Fees & commission Other non-interest income Figure 2.22: AMCs - Capital and Retained Earnings 400
350
Liquidity and Funds Management… 300 2.4.60 Building societies recorded an average liquidity 250 200
ratio of 93.89% as at 31 December 2005, compared Z$ billion 150 100
to 82.99% recorded as at 31 December 2004. 50
0 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05
Total Capital Retained Earnings
30 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER TWO - CONDITION AND PERFORMANCE OF THE BANKING SECTOR CONTINUED
2.5.5 Of the 18 AMCs in operation as at 31 December included non-governmental organisations (NGOs) 2005, six (6) had capital levels below the and individuals. minimum requirement of $10 billion effective 30 September 2006. Earnings and profitability… 2.5.10 Asset management companies recorded an increase Funds under Management… in profitability during the year 2005, which was 2.5.6 Total funds under management for the sector as at attributed to growth in business volumes. 31 December 2005 amounted to $86.07 trillion up from $6.12 trillion as at 31 December 2004. 2.5.11 Net profit after tax for the year ended 31 The increase in funds under management was December 2005 was $267.49 billion up from largely attributed to the bull-run that prevailed on $20.30 billion recorded in December 2004. the stock market over the greater part of 2005. Return on assets improved from 12.20% in December 2004 to 41.56% in December 2005. 2.5.7 The graph below illustrates the trend in the composition of funds under management for the 2.5.12 The graph below depicts the profitability ratios of sector during the year: AMCs:
Figure 2.23: AMCs - Composition of Funds Under Management Figure 2.24: AMCs - Key Earnings Indicators 100 100
80 80
60 60
40 40 % Percentage 20 20 % Percentage
0 0 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Money Makert 29 23 21 16 10 ROE 87 36 39.33 46.45 76 Equities 55 66 77 84 78 Cost/Income 46 46 53 61 39 Other 16 11 2 0 12 ROA 12 33 16.58 23.6 41
2.5.8 The proportion of equity investments in total 2.5.13 The average ratio of total expenses to total income funds under management increased from 55% to improved from 46% in December 2004 to 39% in 78% while that of money market investments December 2005. The improvement was mainly declined from 29% to 9.28% as at 31 December attributable to a combination of increased income 2004 and 2005 respectively. This was largely due from higher business volumes and enhanced cost to unfavourable returns on the money market in containment measures. comparison to the equity market during the year.
2.5.9 In terms of clientele base, pension funds and corporates continued to be the major sources of business for this sector. Other sources of funds
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CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION
3.1 INTRODUCTION 3.2.4 It should be noted that the invocation of section 3(3) of the Banking Act does not amend the 3.1.1 The Reserve Bank implemented a range of respective governing statutes, nor does it do away supervisory measures during 2005. These included with them. Rather, it complements each of them new initiatives as well as enhancement of activities by cross-referencing only those sections of the that commenced in 2004. The supervisory Banking Act that are essential and relevant. The measures instituted played a critical role in invocation provides for regulatory consistency restoring stakeholder confidence in the aftermath across the financial sector in respect of the Reserve of the 2003/4 financial sector turbulence. Bank’s supervisory role in relation to these institutions. 3.2 REGULATORY DEVELOPMENTS 3.3 REVIEW OF MINIMUM CAPITAL Invocation of Section 3 (3) of the Banking Act REQUIREMENTS (Chapter 24:20)… 3.2.1 The Minister of Finance through General Notice Overview… No. 101 of 2005 gazetted the invocation of 3.3.1 Capital provides a safety net to depositors and other Section 3(3) of the Banking Act on 11 March providers of finance against losses that a banking 2005. institution might incur. Consequently it is important that banking institutions be adequately 3.2.2 Section 3 (3) of the Banking Act provides that the capitalised at all times. Banking institution’s capital Minister may, by notice in the Gazette, direct that should be permanently available to absorb losses; all or some of the provisions of the Banking Act must not impose mandatory fixed charges against apply to building societies, asset managers, earnings; and must allow for legal subordination to collective investment schemes, moneylenders or the rights of depositors and other creditors. the People’s Own Savings Bank (collectively referred to herein as “institutions”). New Capital Requirements… 3.3.2 A comparative analysis of the country’s minimum 3.2.3 The invocation of section 3(3) of the Banking Act capital requirements, with other jurisdictions in in relation to the aforementioned institutions was the region and beyond was carried out in July meant to address the supervisory gaps or 2005. The research indicated that local minimum weaknesses in the legislation governing them. This capital requirements were generally below has resulted in an enhanced supervisory international levels. framework that enabled effective supervision and monitoring of the financial sector. 3.3.3 In order to promote the safety and soundness of the financial sector, minimum capital requirements
32 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
for banking institutions and asset management May 2005 for the establishment of a finance companies were reviewed upwards. This was house. As at 31 December 2005, the application necessitated by the changing economic was still pending. The project promoters were yet fundamentals. The review is expected to reinforce to raise the required minimum start up capital. public confidence in the banking sector, and boost the level of business that banks can underwrite. Asset Management Companies… 3.4.2 Out of the thirty-one (31) asset management 3.3.4 The minimum capital requirements effective companies licensed in 2004, seventeen (17) were 30 September 2006 are pegged in US dollars, as issued with perpetual licences in 2005, upon indicated in table 3.1 below. satisfying the minimum requirements for licence renewal. Table 3.1: New Minimum Capital Requirements 3.4.3 Thirteen asset management licences were revoked Type of Institution USD Equivalent New Capital in 2005 and one (1) in 2006, following a Commercial Banks USD10 million ZWD1 trillion determination that the institutions concerned Merchant Banks USD7.5 million ZWD750 billion were, among other irregularities, involved in non- Finance Houses USD7.5 million ZWD750 billion permissible activities such as lending. Building Societies USD7.5 million ZWD750 billion Discount Houses USD5 million ZWD500 billion Microfinance institutions… Asset Management Cos. USD1 million ZWD100 billion 3.4.4 As at 31 December 2005, 218 licences had been issued, 25 applications withdrawn, and 11 3.3.5 The Reserve Bank will continue to review the applications rejected. minimum capital requirements in line with significant movements in economic fundamentals. 3.4.5 The reasons for rejection varied, with the most Banking institutions are therefore encouraged to notable ones being: be proactive and review their capitalization levels a) irregular shareholding structures; in line with the operating environment and their b) inadequate capitalisation; risk profiles. c) misrepresentation of information; d) failure to submit adequate information and
3.4 LICENSING ACTIVITIES FOR BANKING AND documentation in time; NON-BANK FINANCIAL INSTITUTIONS e) unfit promoters and senior management; and f) illegal mobilisation of deposits.
Applications for banking licences… 3.4.1 One commercial banking licence was issued in 3.4.6 Overall, the licence application turnaround time January 2005. Another application was received in was long due to piecemeal submission of requisite
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 33 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
information and documentation by applicants, as Table 3.2: Frequency of Examinations well as late response to the requests for additional information. Institutional Frequency of Composite On-Site 3.4.7 Reserve Bank regional offices in Bulawayo, Gweru Rating Examinations. and Mutare have helped to expedite the 1 Should have on-site examinations processing of licensing applications. within 24 Months. 2 Should have on-site examinations Licence renewals… within 18 months. 3.4.8 The Reserve Bank is aware of the planning 3 Should have on-site examinations on a constraints being faced by microfinance yearly basis institutions as a result of the legal requirement to 4-5 Should have on-site examinations renew licences annually. at six (6) month intervals.
3.4.9 Efforts are underway through the NTF to develop Banking Institutions… an enabling regulatory and supervisory framework. 3.5.3 The division carried out eight (8) full scope and 43 targeted on-site examinations. There was one (1) 3.5 ONGOING SUPERVISION OF BANKING pre-opening inspection. INSTITUTIONS AND ASSET MANAGEMENT COMPANIES 3.5.4 The examinations were carried out to assess the soundness of banking institutions and in the case On-Site Examinations… of targeted examinations, to evaluate the 3.5.1 On-site examinations enable supervisors to soundness in relation to a particular risk or validate the information provided by banks business line. through off-site reports as well as evaluate the adequacy of risk management systems, internal Asset Management Companies… control systems, and the quality and competency 3.5.5 A total of twenty eight (28) examinations of asset of management. management companies were conducted during 2005. The on-site examinations were conducted 3.5.2 Frequency of on-site examinations per institution to assess the financial soundness of the asset depends on the institutional composite ratings. management companies, and to determine The table below shows the frequency of whether the institutions were conducting proper examinations as per the Risk-Based Supervision asset management business. Framework.
34 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
3.6 MAJOR ON-SITE EXAMINATION FINDINGS constituted in line with regulatory requirements.
3.6.1 The major findings of on-site examinations 3.6.8 In some institutions, there was lack of conducted in 2005 were as follows: independence between credit granting and loans review committees, thus compromising good Capital Adequacy… corporate governance practices. 3.6.2 It was noted that although most banking institutions met the prudential minimum capital 3.6.9 Statutory board committees such as the loans requirements, the capital levels for some banks review committees were not meeting frequently as were inadequate and could not provide sufficient stipulated in the regulations. business underwriting capacity. The low business volumes in some institutions resulted in marginal 3.6.10 The examinations noted weak internal control earnings performance, and in some cases systems in some institutions. These were significant losses were incurred. evidenced by lack of segregation of duties between front and back office functions, inadequate 3.6.3 It was also determined that some banking internal policies, ineffective internal audit and risk institutions overstated their capital levels through management functions. Further there was lack of under provisioning for loan losses. responsiveness to internal audit recommendations in some institutions. Asset Quality… 3.6.4 Poor credit underwriting and administration 3.6.11 The on-site examinations also noted weaknesses in standards were prevalent in some institutions. This information technology systems in a few banking gave rise to high levels of non-performing assets. institutions. These institutions’ information technology systems failed to produce adequate and 3.6.5 In some of the institutions it was determined that reliable management reports necessary for sound improper loan grading systems were being used. As decision making, thus hindering effective board a result provisions for loan losses were understated and management oversight. In some cases poor leading to overstatement of capital levels. systems interface resulted in information gaps and unreliable management reports. 3.6.6 It was also noted that some institutions had high concentration risk in their loan portfolios. Other Earnings… institutions were in breach of prudential lending limits. 3.6.12 Some institutions incurred losses on marking-to- market the financial instruments in accordance with Management… IAS 39. 3.6.7 It was noted that most boards were properly
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 35 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
3.6.13 In some cases institutions were under providing 3.6.20 The examinations revealed that balance sheets of for loan losses thereby overstating profits. some banking institutions were not properly structured. In some banking institutions, liabilities 3.6.14 Earnings performance in some banks was were re-pricing faster than assets resulting in the negatively affected by high interest expenses squeeze of margins in an environment of rising emanating from funding huge liquidity gaps. The interest rates. liquidity gaps were mainly a result of contagion effects of following the collapse of a number of 3.6.21 Over reliance by some institutions on unstable banking institutions in 2004. short term funding sources to support growth resulted in huge funding gaps. Liquidity and Funds Management… 3.6.15 There was inadequate senior management ASPEF Examinations… oversight on treasury operations in a number of 3.6.22 Following the establishment of the Agricultural banking institutions. Support and Productivity Enhancement Facility (ASPEF), in June 2005, the Reserve Bank 3.6.16 Some institutions exhibited lack of robust liquidity conducted targeted examinations to assess risk management systems. The weaknesses noted adherence to guidelines on the disbursement and included lack of internal benchmarks for liquidity administration of the facility. management and poor contingency planning. Further, the problems were exacerbated by huge 3.6.23 Of the 17 financial institutions that accessed ASPEF funding gaps, poor asset quality, low investor 11 were examined. The examinations revealed that confidence, and weak asset and liability the disbursing institutions were generally complying management. with the guidelines.
3.6.17 The funding gaps resulted in high financing costs Statutory Reserve Examinations… due to expensive borrowings on the inter-bank 3.6.24 The Reserve Bank carried out on-site market and overnight accommodation at the examinations to verify the accuracy of statutory Reserve Bank to fund the gaps. reserve calculations, and the correctness of statutory reserve returns. 3.6.18 High deposit concentration was also prevalent in some institutions. 3.6.25 The major findings were that some institutions: a) understated statutory reserves; Sensitivity to market risk… b) abused group structures to evade payment of 3.6.19 It was noted that in some institutions, growth was statutory reserves; not matched by increasing levels of sophistication c) failed to pay their statutory reserve in risk management systems and controls. requirements; and
36 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
d) disguised shorter term deposits as 91 day curatorship in 2005. However, as shown in deposits. Appendix 4, four (4) of the banking institutions that were placed under curatorship in 2004 Interest Rate on Deposits… remained as such in the period under review. 3.6.26 Targeted examinations were also carried out on all Shareholders of these institutions appealed against banking institutions to verify the interest rates the actions taken by the curators in respect of the paid on the deposits held. It was noted that there sale of assets to ZABG. was a wide disparity between deposits and lending rates as banks were paying low interest rates on Liquidations… savings and current accounts. 3.7.5 In cases where banking institutions are determined to be insolvent they will be earmarked for 3.7 SUPERVISORY ACTIONS liquidation.
3.7.1 The Reserve Bank applies a range of supervisory 3.7.6 No banking institution was placed under actions to correct the weaknesses identified liquidation in 2005. Sagit Finance House Limited through off-site surveillance or on-site was closed on 2 March 2006, and a Provisional examinations. Liquidator was appointed. The institution was determined to be insolvent and had liquidity 3.7.2 The enforcement actions taken include issuance of challenges emanating from poor profitability, a Corrective Orders, appointment of advisor or huge non-performing loan book, and collapse of supervisor, appointment of a curator, suspension corporate governance systems and structures. of directors, officers or employees, cancellation of licences, closure and liquidation of financial Cancellation of Licences… institutions. 3.7.7 A total of 13 asset management companies which failed to comply with the Asset Management Act, Curatorship… (Chapter 24:26) and hence were considered a 3.7.3 The RBZ may, in accordance with Section 53 (1) threat to financial sector stability, had their licences of the Banking Act (Chapter 24:20), place an cancelled and business wound up during 2005. institution under the management of a curator if it is determined that the institution is in an unsound Corrective Orders… financial condition and is not operating in 3.7.8 A corrective order is an imposed plan to correct accordance with sound administrative and deficiencies. Corrective orders specify actions, accounting practices and procedures. persons responsible, time-frame and target levels for achievement of specific actions. It is formal in 3.7.4 There were no institutions placed under format and language in order to prepare, if
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 37 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
necessary, for further regulatory sanctions if the director evaluations to ensure effective enhancement board fails to comply with the order of corporate governance performance.
3.7.9 In 2005 two (2) banking institutions and four (4) 3.8.2 Board and Director Evaluations encourage a asset management companies were issued with culture of continuous self reflection and Corrective Orders in terms of the Banking Act, assessment within banking institutions. The (Chapter 24: 20) and the Asset Management Act, exercise broadens board focus, improves (Chapter 24: 26) respectively. execution of plans, director accountability, and credibility. 3.7.10 The corrective orders were issued to asset management companies following the 3.8.3 There has been an improvement in the way determination that they were operating outside banking institutions and asset management the ambit of the statutory and regulatory companies view the board and director evaluation requirements. In particular, they were taking process. However, some boards are yet to positions with clients’ funds and giving out loans. appreciate the importance of the process as an They also had capitalization challenges and poor effective enhancer of corporate governance corporate governance structures. performance.
3.7.11 The corrective orders required the institutions to: 3.9 RISK MANAGEMENT IN THE FINANCIAL a) inject additional capital; SECTOR b) set up risk management systems to measure and manage liquidity, credit and market risks; Overview… and 3.9.1 The Reserve Bank undertook a survey of risk c) enhance board and management oversight. management systems in the banking sector between August and September 2005. The objective of the 3.8 COMPLIANCE AND CORPORATE study was to assess the adequacy of banking GOVERNANCE institutions’ risk management practices as well as facilitate the development of comprehensive risk Board and Director Evaluations. . . management guidelines for the sector. 3.8.1 In order to promote effective board oversight, and as a follow up to Guideline No. 01-2004/BSD: 3.9.2 The survey covered banking institutions’ risk Corporate Governance, a Framework on Board and management approaches and methodologies both Director Evaluations was circulated to the market in at a strategic and operational level. The main risk February 2005. The framework serves to assist elements addressed in the survey were credit, financial institutions in conducting board and market, liquidity, and operational risks. The
38 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
banking sector is exposed to all these risks banking sector based on the fundamental elements including legal and compliance, strategic and of a sound risk management framework. reputational risks. 3.10 MICROFINANCE NATIONAL TASK FORCE Major findings of the survey… 3.9.3 The survey revealed a relatively high level of 3.10.1 The Reserve Bank initiated the process of awareness and understanding of risk management formulating an enabling regulatory and supervisory in some banking institutions while in others a framework for the microfinance sector. number of deficiencies were noted: a. failure by senior management to implement 3.10.2 Pursuant to the above, a National Taskforce board approved policies; comprising, government ministries, microfinance b. absence of clearly defined non-credit risk apex associations, microfinance practitioners, management policies in a number of consumer protection organizations Reserve Bank institutions; and other stakeholders was constituted in c. inadequately resourced risk management August 2005. functions, including the absence of specific budgetary allocations to fund risk 3.10.3 The mandate of the National Taskforce was to management activities; draft a National Microfinance Policy upon which d. a number of banking institutions either did not the Microfinance Regulatory Framework will be have or had under-developed operational risk anchored. measurement methodologies; e. policies that do not adequately address risk 3.10.4 The roadmap shown hereunder was adopted to guide identification, measurement, monitoring, the process that will culminate in the development of reporting and control of all risks; Microfinance Regulatory Framework. f. policies that do not define roles and responsibilities for Board, Risk Management Microfinance Roadmap Committees, Risk Management Department Setting up a National Taskforce on Microfinance and Internal Audit; and g. in some instances independence of the Risk Survey of the Microfinance Industry Management function was compromised through performance of both risk National Microfinance Policy management and operational duties.
Capacity Building Programme 3.9.4 The Reserve Bank shall continue to provide guidance on sound risk management in the Microfinance Regulations/Act
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3.10.5 Steps One and Two relating to setting up a supervised MFIs respectively; National Taskforce on Microfinance and i) establishment of a Deposit Protection Scheme conducting a National Microfinance Survey have for deposit taking MFIs; already been accomplished. j) establishment of a Credit Reference Facility for the microfinance sector; 3.10.6 During the year under review the National Task k) strengthen Apex Bodies to enable them to Force engaged a consultant to undertake the survey. effectively provide technical assistance to their members; and Key Survey Recommendations… l) collateral should always be disposed through 3.10.7 Some of the key recommendations from the legal channels. survey were as follows: a) the need to develop a National Microfinance Way Forward… Policy that articulates the vision, mission and 3.10.8 The National Taskforce will consider the proposed objectives of the microfinance sector; recommendations and incorporate them in the b) developing a commensurate Microfinance Act development of the National Microfinance Policy that covers prudential and non-prudential and subsequently the Microfinance Act. supervision; c) proposal for a tier system that articulates 3.11 SUPERVISION OF OTHER NON-BANK prudential and non-prudential responsibilities FINANCIAL INSTITUTIONS and allows graduation of institutions; d) establishment of an Independent Regulatory 3.11.1 The regulation and supervision of the other non- Agency responsible for non-prudential bank financial institutions is the responsibility of supervision, consumer protection and capacity various authorities shown in table 3.3. building; e) development of a sustainable interest rate framework; f) establishment of a Microfinance Development Fund to provide wholesale lending, guarantee funds and capacity building initiatives to the microfinance sector; g) Capacity Building of the Reserve Bank’s Microfinance Unit to enable it to effectively carry out its supervisory responsibilities; h) perpetual licences and three year renewable licences for prudential and non-prudentially
40 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER THREE - MAJOR DEVELOPMENTS AND ACTIVITIES IN BANKING SUPERVISION CONTINUED
Table 3.3: Regulatory Authorities of other Non-Bank 3.11.4 In its efforts to promote financial stability, the Financial Institutions RBZ has engaged other local financial sector regulators to ensure that all systemically important Financial Institution Regulatory Authority institutions, including insurance companies, Insurance companies and Commissioner of Insurance pension and provident funds, as well as capital pension funds and Pension Funds market players are adequately and effectively Securities companies Zimbabwe Stock Exchange regulated and supervised by their respective Venture capital companies None regulators. Infrastructure Development Ministry of Finance Bank of Zimbabwe Securities Industry… Savings & Credit Ministry of Youth, Gender 3.11.5 Cognisant of the weaknesses of the current Co-operatives (SACCOS) & Employment Creation regulatory framework for the securities industry, National Social Security Ministry of Labour and the Securities Act (Chapter 24:25) was enacted in Authority Social Services 2004 to replace the outdated Zimbabwe Stock Small Enterprise Development Ministry of Small and Exchange Act (Chapter 24:18) of 1974. The new Corporation (SEDCO) Medium Enterprises Act will come into effect upon the establishment of a Securities Commission. 3.11.2 The weaknesses of the current regulatory arrangement where there are several regulatory 3.11.6 The commission will have broad authority over all agencies with limited formal arrangements to aspects of the securities industry that include the coordinate supervisory efforts create room for power to register, regulate and oversee brokerage regulatory arbitrage and supervisory gaps in the firms, transfer agents, and clearing agencies as well financial sector. The financial institutions are as the nation's securities exchanges. subject to varying levels of regulation and supervision. In some instances regulation and Venture Capital Companies… supervision is not yet fully developed. For example 3.11.7 The Reserve Bank, as part of its efforts to promote venture capital companies in Zimbabwe are not discipline, ethical practice, and mutual supervised under any specific statute except the cooperation amongst players in the venture capital Companies Act. industry, facilitated the set up of a Working Committee. The committee was tasked with the 3.11.3 Non-bank financial institutions have the potential responsibility of spearheading the establishment of to affect financial stability both through their an Association of Venture Capital Companies in direct role as providers of financial services and Zimbabwe. indirectly through counterparty relationships. The systemic importance of non-bank financial 3.11.8 The establishment of an Association of Venture institutions cannot be underestimated. Capital Companies is the initial step towards the
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formulation of regulatory interventions aimed at Reporting Standards and Consolidated Accounting ensuring the safety and soundness of the Venture in partnership with an accounting firm. Capital industry and consequently enhancing the stability of the financial sector. 3.12.5 The Reserve Bank also continues to value the benefits derived from regional and international 3.12 STRENGTHENING SUPERVISORY CAPACITY organisations’ capacity building programmes. To this end, the Division participated in a number of 3.12.1 The RBZ continued to build capacity of its staff. workshops organized by the Macroeconomic During the year training and development was Financial Management Institute (MEFMI), conducted through on-the-job training, Financial Stability Institute (FSI), East Afritac, mentoring, coaching, induction courses, Basel Committee on Banking Supervision, among attachments, and the use of an on-line training others. facility, FSI Connect, offered by the Bank for International Settlement (BIS). 3.12.6 BLSS also embarked on training and capacity building of bank examiners through attachments 3.12.2 BLSS staff continued to make extensive use of the with local banks, asset management companies FSI Connect facility. The facility provides tutorials and microfinance institutions. on practical banking and bank supervision topics; this includes tutorials on Credit Risk, Operational 3.12.7 During the year under review, BLSS recruited Risk and Market Risk. There is also additional staff with specialist skills and comprehensive coverage of the various aspects of experience. This enabled the division to diversify the revised International Convergence of Capital its skills base and develop dedicated specialized Measurement and Capital Standards (Basel II) teams in modeling and development of the Basel II framework. The study modules are regularly supervisory framework. updated to incorporate topical banking and supervisory issues.
3.12.3 The in-house training programmes included legislative framework governing the operations of financial institutions; the enhanced risk-based supervisory framework, and Basel II framework.
3.12.4 Staff also benefited from both local and foreign courses during the year 2005. The division conducted a workshop on International Financial
42 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005
CHAPTER FOUR - TROUBLED BANK RESOLUTION
4.1 INTRODUCTION strategy going forward is that curatorship will be limited and banking institutions which cannot be 4.1.1 The maintenance of financial soundness and rehabilitated in the normal course of business will, stability is a key statutory function of the Reserve as a general rule, be liquidated. Bank. Financial system stability is the resilience of a financial system to internal and external shocks. 4.2 MARKET SOLUTIONS Financial stability is evidenced by and reflected through an effective regulatory infrastructure, 4.2.1 During the year 2005, the Reserve Bank effective and well developed financial markets, encouraged troubled banking institutions to come and sound financial institutions. up with market solutions addressing underlying causes of the institutions’ challenges . 4.1.2 Cognisant of the need to ensure maintenance of financial stability through early detection of 4.2.2 Various stakeholders including curators, irregularities and adherence to prompt corrective shareholders, depositors and other creditors of the action, the Reserve Bank established the Market troubled institutions came up with resolution Stabilisation and Pre-Emptive Strategies Unit frameworks for the different institutions as during 2005. The unit’s mandate is to enhance discussed below. financial stability by continuously assessing the stability and efficiency of the financial system, CFX Bank and CFX Merchant Bank… formulating and reviewing appropriate policies for 4.2.3 CFX Bank Limited (CFXB) and CFX Merchant early intervention and crisis resolution. Bank Limited (CFXMB) were placed under curatorship on 17 December 2004 after a 4.1.3 Prior to 2005, the Reserve Bank largely relied on determination by the Reserve Bank that the curatorships as a medium for problem bank institutions were facing serious liquidity and resolution. Between 2003 and 2004, ten banking solvency challenges. institutions were placed under curatorship by the Reserve Bank, following determination that the 4.2.4 At the time of curatorship, CFX Merchant Bank institutions were unsafe and unsound. In order to Limited (CFXMB) and CFX Bank Limited maintain confidence in the banking sector, and (CFXB) had a capital deficit of $192 billion. minimize financial loss to depositors, experience has shown that curatorship should be for a limited 4.2.5 The curator, in conjunction with the holding period of time. company, CFX Financial Services Limited (CFXFS), worked out a rescue plan which 4.1.4 In order to expedite problem bank resolutions and included the closure of CFX Asset Management minimize the costs associated with curatorship, the Company and the merger of CFXB and CFXMB.
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4.2.6 In terms of the Scheme of Arrangement sanctioned 4.2.12 The curatorship of IBS was lifted with effect from by the High Court, all the depositors of CFXB 1 August 2005, while IDH and IBC had their received, net of any debit balances, up to $5 curatorship lifted on 31 December 2005. million as settlement in respect of their deposits in CFXB. The remainder of the deposits was 4.2.13 The re-opening of the three institutions followed a converted into shares in the holding company. determination that the institutions were now in a sound financial condition and were operating 4.2.7 Depositors of CFXMB received 100% of their profitably under new management. deposits net of debit balances. National Discount House Limited… 4.2.8 As a result of the Scheme of Arrangement, the 4.2.14 The discount house experienced severe liquidity depositors constituting various companies and challenges in December 2003, owing to its individuals now control 63% of CFXB, CFXFS exposures to financial and non financial now controls 13%, and Allied Financial Services institutions. The discount house also faced has 24%. solvency problems emanating from non- performing insider loans. 4.2.9 The Minister of Finance approved the merger of CFX Merchant Bank and CFX Bank Limited and 4.2.15 In order to address the solvency challenges, NDH the bank commenced operations in the first undertook a two-pronged recapitalisation quarter of 2006. programme involving conversion of debt into equity in terms of a High Court sanctioned scheme Intermarket Group… of arrangement, and a rights issue. 4.2.10 The three subsidiaries of Intermarket Holdings Limited (IHL): Intermarket Building Society (IBS), 4.2.16 As a result of the scheme of arrangement and Intermarket Discount House Limited (IDH) and rights issue, the institution met minimum capital Intermarket Banking Corporation (IBC) were requirements. placed under the management of a curator on 12 March 2004. This followed a determination by the 4.2.17 NDH was authorised to resume normal operations Reserve Bank that the institutions were facing on 20 February 2006 after the adequacy of capital severe solvency and liquidity problems. was verified and adequate measures to address the issues that had led to the demise of the institution 4.2.11 In the second quarter of 2005, the group had been put in place. implemented a Scheme of Arrangement, which entailed the conversion of debt into equity in IHL. First National Building Society… The Scheme of Arrangement was sanctioned by 4.2.18 First National Building Society (FNBS) was placed the High Court on 13 July 2005. under curatorship on 7 February 2003 after a
44 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 CHAPTER FOUR - TROUBLED BANK RESOLUTION CONTINUED
determination by the Reserve Bank that it was 4.3 APPEALS TO THE RESERVE BANK facing serious liquidity challenges. 4.3.1 Royal Bank Zimbabwe Limited and Trust Bank 4.2.19 Liquidation proceedings were commenced in Corporation Limited appealed to the Supreme March 2004, after a determination that the Court against the decision of the curators to sell continued curatorship of the society would not the assets of the troubled institutions to ZABG. enable it to become a successful concern. The The Supreme Court subsequently directed that the proceedings were opposed by the major former shareholders of the said banking shareholders in the High Court. institutions appeal to the Reserve Bank in terms of the Banking Act. 4.2.20 A final liquidation order was granted on 13 April 2005. This was however subsequently deferred to 4.3.2 In the interest of fairness, transparency and allow for the consideration of the re-capitalization objectivity the Reserve Bank constituted an proposals by the incoming shareholders. independent panel to make an in-depth enquiry and assessment of the entirety of what transpired 4.2.21 FNBS was given until 30 June 2006 to finalise the in the institutions concerned, leading to the recapitalization process and re-open its doors to the curatorships and eventual sale of assets to ZABG. public. The institution, however, failed to raise the required minimum capital levels and reverted to the 4.3.3 The independent panel comprised of: final liquidation order of 13 April 2005. • an international expert on corporate governance; Time Bank of Zimbabwe Limited… • a former Central Bank Governor from the 4.2.22 Time Bank of Zimbabwe Limited was placed region; under curatorship on 7 October 2004 after a • a retired High Court Judge; and determination that the bank was insolvent, was • eminent business persons. not operating in accordance with sound administrative and accounting practices, and was 4.3.4 The Panel determined that the curators of Royal experiencing serious liquidity challenges. Bank and Trust Bank acted bona fide and in the best interests of the Banks, their depositors and other 4.2.23 The Registrar of Banking Institutions cancelled the creditors, having regard to the financial position the banking licence of Time Bank of Zimbabwe Limited banks were in, the mismanagement prior to their in May 2006, on the basis that the bank could no being placed under curatorship, and the loss of longer maintain net assets sufficient to safeguard its public confidence that they had suffered. creditors and that the institution could no longer maintain the prescribed minimum amounts of 4.3.5 Further, the Appeals Panel determined that no capital and reserves. court would invalidate the agreement the Curators
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 45 CHAPTER FOUR - TROUBLED BANK RESOLUTION CONTINUED
concluded with ZABG, having regard to the time 4.4.2 In order to minimize moral hazard in the banking that has lapsed since the agreement was entered sector, and to encourage troubled banks to make into, the consequences for the public at large and more concerted efforts to seek market solutions to the extent to which third parties have relied upon their problems, a decision to withdraw the the decision. Troubled Bank Fund was taken in 2005.
4.3.6 The Panel also determined that the in duplum rule did not apply to loans and advances made by the RBZ to banks as they were not ignorant members of the public who needed to be protected from exploitation.
4.3.7 Further, it was determined that the Reserve Bank did not have the power to grant the nature of the relief sought.
4.3.8 The Reserve Bank adopted the above findings and dismissed both appeals.
4.3.9 Trust Bank and Royal Bank subsequently lodged an appeal to the Minister against the decision, in terms of section 73 of the Banking Act. A determination is still to be made.
4.4 TROUBLED BANK FUND
4.4.1 At the height of the problems in the banking sector, the Reserve Bank created the Troubled Bank Fund to resolve solvency and liquidity deficiencies in banking institutions. A number of banking institutions that benefited from the Troubled Bank Fund failed to repay the loans and to recapitalize, or to find market solutions to their problems.
46 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 1 - STATISTICAL TABLES % % 3.73% 3.39% 4.80% 2.45% 9.63% 8.84% 9.69% 2.93% 17.17% 17.44% 12.46% 15.60% 15.39% 51.47% 25.01% 90.37% 90.31% 100.00% 100.00% 147.10 COMPOSITE '2005 COMPOSITE '2005 3,222.92 2,923.25 4,146.61 2,117.23 4,291.48 4,948.68 8,312.82 7,629.33 8,362.79 1,402.46 2,530.66 78024.03 Z$billion Z$billion 86,336.85 14,821.14 15,057.12 11,922.89 10,758.55 77,974.06 23,127.40 14,875.16 13,472.70 13,291.19 44,437.55 21,589.83 86,336.85 % % 3.06% 4.30% 4.94% 9.23% 6.17% 8.05% 1.48% 20.38% 11.31% 11.51% 24.52% 17.78% 11.62% 40.83% 24.81% 88.49% 88.38% 100.00% 100.00% 235.28 516.00 725.23 833.93 613.29 820.47 632.26 250.47 3,438.51 1,556.56 1,041.47 1,206.93 1,907.91 1,941.06 4,012.63 4,136.63 4,768.89 1,358.85 2,999.83 1,960.18 6,888.59 4,185.85 COMPOSITE '2004 COMPOSITE '2004 14929.47 Z$billion Z$billion 16,870.53 14,910.35 16,870.53 % % 2.14% 8.24% 5.33% 6.51% 4.81% 6.01% 4.81% 0.76% 22.14% 16.39% 13.68% 13.23% 12.37% 55.17% 28.42% 95.19% 95.19% ANK ANK 100.00% 100.00% .00 ZIMB ZIMB 52.00 60.72 61.08 172.36 665.08 429.60 525.28 681.01 388.38 484.71 997.49 388.38 7678.36 1,785.67 8,066.74 7,678.36 1,322.37 1,702.85 1,103.26 2,014.52 1,067.17 1,127.89 4,450.37 2,292.28 8,066.74 Z$ billion Z$ billion % % 0.00% 3.51% 9.39% 0.00% 5.76% 0.11% 0.11% 5.08% 24.59% 28.43% 39.47% 27.86% 20.20% 16.47% 19.01% 99.89% 99.89% 100.00% 100.00% ZABG ZABG .00 .00 .00 1.91 1.91 58.79 96.45 48.85 56.92 14.47 42.83 84.94 157.18 411.55 475.80 346.01 660.60 703.43 466.25 338.13 275.59 318.08 1671.69 1,671.69 1,673.60 1,673.60 Z$ billion Z$ billion % % T T 2.29% 4.33% 0.26% 3.05% 7.46% 7.46% 7.34% 6.45% 20.86% 13.98% 19.70% 10.58% 61.21% 23.28% 11.75% 92.54% 92.54% 100.00% 100.00% .00 ANCHAR ANCHAR 2.67 40.94 17.22 ST ST 365.20 691.34 482.38 487.37 3,330.51 3,102.48 2,232.21 1,192.13 3,145.37 6,187.98 1,689.64 1,706.86 1,192.13 9,775.50 3,717.21 1,172.95 1,030.49 1,876.28 14777.50 15,969.63 14,777.50 15,969.63 Z$ billion Z$ billion % % 0.00% 1.88% 2.20% 0.00% 3.85% 5.75% 3.85% 3.22% 19.43% 16.18% 17.45% 65.58% 32.52% 15.89% 12.20% , 2005) 96.15% 96.15% 100.00% 100.00% ANBIC ANBIC .00 .00 .00 ST ST 205.18 239.63 279.33 419.33 158.70 626.81 785.50 419.33 351.11 2,117.68 1,762.84 1,901.92 1,318.16 1,618.24 7,146.43 3,930.70 3,544.46 1,731.46 1,329.73 10478.62 10,478.62 10,897.95 10,897.95 Z$ billion Z$ billion % % 3.38% 0.00% 0.00% 2.61% 8.02% 2.61% 2.89% 26.68% 12.77% 11.01% 36.65% 27.30% 22.35% 14.78% 28.94% 97.39% 97.39% 100.00% 100.00% NMB NMB .00 .00 99.85 22.31 88.47 92.73 40.15 92.73 120.13 947.92 453.56 391.24 177.79 834.11 284.83 913.54 969.90 793.97 102.84 524.87 3459.62 3,459.62 3,552.35 1,301.96 1,028.04 3,552.35 Z$ billion Z$ billion % % AN AN 1.87% 5.25% 0.00% 0.00% 6.84% 3.67% 3.68% 2.55% 8.91% 8.58% 45.94% 34.96% 45.94% 19.09% 12.72% 54.06% 54.06% 100.00% 100.00% OPOLIT OPOLIT .00 .00 .00 16.15 45.27 58.99 31.63 11.27 31.70 16.21 41.20 21.94 76.82 73.96 77.23 466.03 196.68 395.98 862.01 150.83 466.03 301.39 395.98 164.58 109.63 862.01 METR METR Z$ billion Z$ billion ABLE 1A T % % 0.10% 2.68% 0.29% 3.37% 0.86% 8.59% 8.81% 11.20% 27.56% 25.77% 18.84% 31.73% 18.84% 16.28% 25.10% 81.16% 81.16% 100.00% 100.00% MBCA MBCA .00 7.32 1.56 21.70 25.70 64.39 842.78 201.92 786.38 253.74 238.71 646.55 663.43 6108.57 6,108.57 2,073.89 1,939.19 1,417.61 7,526.18 1,361.10 1,915.06 2,387.74 1,417.61 1,225.13 1,889.36 7,526.18 Z$ billion Z$ billion % % 7.18% 8.18% 0.00% 0.00% 2.07% 0.05% 4.80% 3.14% 6.02% 17.44% 22.99% 74.56% 28.51% 12.66% 12.40% 95.20% 97.93% 100.00% 100.00% .00 .00 .96 KINGDOM KINGDOM 47.25 36.97 85.75 44.16 56.13 128.28 146.15 311.42 410.51 241.02 316.07 271.06 270.22 456.20 509.11 226.07 107.45 221.49 1748.97 1,700.19 1,785.93 1,785.93 1,331.59 Z$ billion Z$ billion % % 2.64% 0.51% 0.00% 9.49% 0.00% 0.00% 0.00% 3.21% 24.06% 10.94% 29.14% 46.48% 14.57% 12.68% 46.28% 100.00% 100.00% 100.00% 100.00% COMPOSITION OF THE BALANCE SHEET (As at 31 December FBC FBC .00 .00 .00 .00 .00 60.49 11.63 70.10 63.89 35.06 12.84 73.50 551.46 217.40 250.70 346.64 667.84 498.79 333.80 290.63 2291.59 2,291.59 2,291.59 1,065.06 1,060.66 2,291.59 Z$ billion Z$ billion % % 3.10% 4.87% 3.89% 9.72% 8.99% 9.01% 8.99% 0.92% 14.55% 20.55% 20.10% 13.39% 50.14% 17.71% 14.09% 91.01% 91.01% 100.00% 100.00% CBZ CBZ .00 444.64 698.68 557.72 546.31 369.82 131.61 1,393.89 2,087.43 1,288.96 2,947.11 1,932.50 1,292.31 1,288.96 2,883.63 2,070.21 1,920.82 7,191.71 2,540.06 2,909.87 2,020.64 2,642.69 13055.12 13,055.12 14,344.08 14,344.08 Z$ billion Z$ billion % % S S Y Y 2.85% 0.54% 1.18% 1.59% 0.39% 3.05% 10.35% 16.83% 19.31% 18.02% 19.31% 27.00% 13.84% 53.19% 12.53% 80.69% 80.69% 100.00% 100.00% CLA CLA .00 AR AR B B 86.76 62.89 455.15 188.46 200.46 253.52 466.72 155.05 486.77 1,649.45 2,683.67 3,078.83 2,872.42 3,078.83 4,305.33 2,572.25 2,206.06 8,479.83 1,997.85 2,152.90 5,240.40 12864.08 12,864.08 15,942.91 15,942.91 Z$ billion Z$ billion % % 1.14% 4.40% 2.06% 0.00% 0.14% 0.00% 0.03% 3.80% 4.98% 27.31% 16.79% 20.47% 46.59% 27.36% 44.91% ANK ANK 99.97% 100.00% 100.00% 100.00% .00 .00 .00 GRIB GRIB 4.73 1.19 3.33 3.01 A A 39.05 70.69 150.49 935.08 575.01 701.04 936.94 349.96 434.09 130.15 580.64 170.47 3423.88 3,422.69 3,423.88 1,595.17 3,423.88 1,537.75 1,971.83 Z$ billion Z$ billion AL BANK AL BANK TES OF DEPOSIT VES Y DEPOSITS ANCES ANKS V SETS TIFICA ANCES V VISIONS CIAL B SETS SETS AND LIABILITIES SETS AL ANS & AD O AL AND RESER AL BOOK AS AL EQUITY AND LIABILITIES TOT AL DEPOSITS AL AS AL PRO -BALANCE SHEET ITEMS - -BALANCE SHEET ITEMS - LIABILITIES UITY ANS & AD VINGS DEPOSITS O CAPIT BALANCES WITH CENTR FOREIGN CLAIMS DUE TO FINANCIAL INSTITUTIONS FOREIGN LIABILITIES COMMER ASSETS CASH AND DUE FROM BANKS TOT OFF EQ TOT NEGOTIABLE CER AMOUNTS OWING TO CENTR SUB OFF TOT SECURITIES AND INVESTMENTS TIME DEPOSITS/ FIXED DEPOSITS FOREIGN CURRENC OTHER LIABILITIES TOT SA TOT FIXED AS DEMAND DEPOSITS L NET L OTHER AS
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 47 APPENDIX 1 - STATISTICAL TABLES CONTINUED
TABLE 1B COMPOSITION OF THE BALANCE SHEET (As at 31 December, 2005) MERCHANT BANKS
ASSETS ABC GENESIS INTERFIN PREMIER RENAISSANCE COMPOSITE '2004 COMPOSITE '2005 Z$ billion % Z$ billion % Z$ billion % Z$ billion Z$ billion % Z$ billion % Z$ billion % CASH AND DUE FROM BANKS 302.44 14.80% 5.92 0.56% 9.95 0.73% 493.07 28.91% .49 0.02% 107.17 6.98% 811.86 9.90% BALANCES WITH CENTRAL BANK 36.19 1.77% 49.73 4.66% 24.05 1.77% 146.07 8.56% 33.50 1.65% 39.24 2.55% 289.54 3.53% FOREIGN CLAIMS 244.90 11.99% 15.76 1.48% 89.64 6.60% 18.27 1.07% 7.43 0.37% 49.79 3.24% 376.00 4.58% SECURITIES AND INVESTMENTS 1,070.52 52.39% 331.17 31.04% 889.02 65.46% 578.65 33.93% 1,381.84 68.06% 609.68 39.68% 4,251.20 51.82% LOANS & ADVANCES 250.74 219.09 25.53 243.12 133.08 376.89 871.56 TOTAL PROVISIONS 35.96 4.42 .94 3.78 19.76 64.87 NET LOANS & ADVANCES 214.78 10.51% 214.67 20.12% 24.58 1.81% 239.33 14.03% 113.33 5.58% 376.89 24.53% 806.69 9.83% FIXED ASSETS 117.53 5.75% 24.78 2.32% 181.69 13.38% 148.10 8.68% 15.18 0.75% 83.63 5.44% 487.28 5.94% OTHER ASSETS 56.99 2.79% 186.49 17.48% 139.21 10.25% 82.17 4.82% 425.61 20.96% 146.31 9.52% 890.47 10.85% TOTAL BOOK ASSETS 2043.35 100.00% 828.53 77.66% 1358.14 100.00% 1705.65 100.00% 1977.38 97.39% 1412.70 91.95% 7913.05 96.45% OFF-BALANCE SHEET ITEMS .00 0.00% 238.37 22.34% .00 0.00% .00 0.00% 52.90 2.61% 123.63 8.05% 291.27 3.55% TOTAL ASSETS 2,043.35 100.00% 1,066.90 100.00% 1,358.14 100.00% 1,705.65 100.00% 2,030.28 100.00% 1,536.33 100.00% 8,204.31 100.00%
EQUITY AND LIABILITIES ABC GENESIS INTERFIN PREMIER RENAISSANCE COMPOSITE '2003 COMPOSITE '2004 Z$ billion % Z$ billion % Z$ billion % Z$ billion Z$ billion % Z$ billion % Z$ billion % TOTAL DEPOSITS 982.23 48.07% 16.94 1.59% 419.40 30.88% 843.68 49.46% 1,185.72 58.40% 509.20 33.14% 3,447.97 42.03% DEMAND DEPOSITS 61.52 2.84 18.03 116.80 6.07 28.76 205.26 SAVINGS DEPOSITS .00 .00 .00 .00 26.69 .00 26.69 TIME DEPOSITS/FIXED DEPOSITS 692.38 1.89 337.31 716.89 1,145.92 440.41 2,894.37 FOREIGN CURRENCY DEPOSITS 228.33 12.22 64.06 9.99 7.05 40.02 321.65 NEGOTIABLE CERTIFICATES OF DEPOSIT .00 .00 .00 .00 .00 .00 .00 AMOUNTS OWING TO CENTRAL BANK 15.50 0.76% 11.30 1.06% 10.71 0.79% 135.45 7.94% 32.74 1.61% 65.50 4.26% 205.69 2.51% DUE TO FINANCIAL INSTITUTIONS 270.39 13.23% .48 0.05% 92.83 6.83% 237.33 13.91% .00 0.00% 154.47 10.05% 601.03 7.33% FOREIGN LIABILITIES 154.68 7.57% .00 0.00% .00 0.00% .00 0.00% 2.65 0.13% 56.77 3.69% 157.33 1.92% CAPITAL AND RESERVES 267.48 13.09% 120.09 11.26% 240.13 17.68% 147.47 8.65% 91.65 4.51% 140.81 9.17% 866.82 10.57% OTHER LIABILITIES 353.07 17.28% 679.71 63.71% 595.08 43.82% 341.73 20.04% 664.61 32.74% 485.95 31.63% 2,634.21 32.11% SUB-TOTAL 2,043.35 100.00% 828.53 77.66% 1,358.14 100.00% 1,705.65 100.00% 1,977.38 97.39% 1,412.70 91.95% 7,913.05 96.45% OFF-BALANCE SHEET ITEMS - LIABILITIES .00 0.00% 238.37 22.34% .00 0.00% .00 0.00% 52.90 2.61% 123.63 8.05% 291.27 3.55% TOTAL EQUITY AND LIABILITIES 2,043.35 100.00% 1,066.90 100.00% 1,358.14 100.00% 1,705.65 100.00% 2,030.28 100.00% 1,536.33100.00% 8,204.31100.00%
48 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 1 - STATISTICAL TABLES CONTINUED
TABLE 1C COMPOSITION OF THE BALANCE SHEET (As at 31 December, 2005)
BUILDING SOCIETIES BEVERLEY CABS INTERMARKET BS FBC BS* COMPOSITE '2004 COMPOSITE '2005 ASSETS Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % CASH AND DUE FROM BANKS 92.79 5.63% 289.66 5.67% 43.20 8.32% 48.61 9.64% 262.58 27.70% 474.28 6.10% BALANCES WITH CENTRAL BANK 221.11 13.42% 342.84 6.71% 69.31 13.34% 53.62 10.63% 62.58 6.60% 686.88 8.83% FOREIGN CLAIMS .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% SECURITIES AND INVESTMENTS 717.30 43.55% 2,057.47 40.27% 115.75 22.28% 166.57 33.03% 241.61 25.48% 3,057.08 39.30% LOANS & ADVANCES 203.79 458.14 105.16 38.13 211.19 805.22 TOTAL PROVISIONS 6.79 3.31 3.81 .88 14.79 NET LOANS & ADVANCES 197.00 11.96% 454.83 8.90% 101.35 19.51% 37.25 7.39% 211.19 22.28% 790.43 10.16% FIXED ASSETS 419.01 25.44% 1,614.61 31.60% 167.34 32.22% 60.05 11.91% 151.68 16.00% 2,261.00 29.06% OTHER ASSETS .00 0.00% 349.37 6.84% 22.48 4.33% 138.16 27.40% 18.45 1.95% 510.01 6.56% TOTAL BOOK ASSETS 1647.20 100.00% 5108.79 100.00% 519.43 100.00% 504.27 100.00% 948.11 100.00% 7779.68 100.00% OFF-BALANCE SHEET ITEMS .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% TOTAL ASSETS 1,647.20 100.00% 5,108.79 100.00% 519.43 100.00% 504.27 100.00% 948.11 100.00% 7,779.68 100.00%
BEVERLEY CABS INTERMARKET BS FBC BS* COMPOSITE '2004 COMPOSITE '2005 EQUITY AND LIABILITIES Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % TOTAL DEPOSITS 905.24 54.96% 3,026.58 59.24% 320.81 61.76% 272.13 53.97% 588.32 62.05% 4,524.77 58.16% DEMAND DEPOSITS .00 213.03 238.26 .00 .00 451.29 SAVINGS DEPOSITS 529.80 1,452.33 1.76 89.40 448.71 2,073.30 TIME DEPOSITS/FIXED DEPOSITS 353.84 1,361.22 80.79 22.42 94.22 1,818.27 FOREIGN CURRENCY DEPOSITS .00 .00 .00 .00 .00 .00 NEGOTIABLE CERTIFICATES OF DEPOSIT 21.60 .00 .00 160.31 45.38 181.92 AMOUNTS OWING TO CENTRAL BANK .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% DUE TO FINANCIAL INSTITUTIONS .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% FOREIGN LIABILITIES .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% CAPITAL AND RESERVES 453.63 27.54% 1,421.55 27.83% 163.02 31.38% 161.02 31.93% 320.07 33.76% 2,199.22 28.27% OTHER LIABILITIES 288.33 17.50% 660.66 12.93% 35.60 6.85% 70.23 13.93% 39.72 4.19% 1,054.82 13.56% SUB-TOTAL 1,647.20 100.00% 5,108.79 100.00% 519.43 100.00% 503.39 99.83% 948.11 100.00% 7,778.80 99.99% OFF-BALANCE SHEET ITEMS - LIABILITIES .00 0.00% .00 0.00% .00 0.00% .88 0.17% .00 0.00% .88 0.01% TOTAL EQUITY AND LIABILITIES 1,647.20 100.00% 5,108.79 100.00% 519.43 100.00% 504.27 100.00% 948.11 100.00% 7,779.68 100.00%
* Formerly Zimbabwe Building Society (ZBS)
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 49 APPENDIX 1 - STATISTICAL TABLES CONTINUED
TABLE 1D COMPOSITION OF THE BALANCE SHEET (As at 31 December, 2005)
DISCOUNT HOUSES ABC SECURIITIES DCZ HIGHVELD TETRAD COMPOSITE '2004 COMPOSITE '2005 ASSETS Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % CASH AND DUE FROM BANKS .00 0.00% .00 0.00% 3.54 1.29% 19.44 13.11% 32.39 11.95% 22.98 1.86% BALANCES WITH CENTRAL BANK 3.29 0.60% 60.74 22.56% 32.06 11.69% 10.82 7.30% 11.92 4.40% 106.92 8.64% FOREIGN CLAIMS .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% SECURITIES AND INVESTMENTS 540.42 98.96% 109.71 40.75% 186.01 67.84% 32.59 21.98% 149.72 55.24% 868.73 70.18% LOANS & ADVANCES .00 .00 3.40 9.44 .00 12.84 TOTAL PROVISIONS .00 .00 .00 .00 .00 .00 NET LOANS & ADVANCES .00 0.00% .00 0.00% 3.40 1.24% 9.44 6.36% .00 0.00% 12.84 1.04% FIXED ASSETS .01 0.00% 11.27 4.19% 18.60 6.78% 25.48 17.18% 8.13 3.00% 55.36 4.47% OTHER ASSETS 2.39 0.44% 87.50 32.50% 30.56 11.14% 50.52 34.07% 68.86 25.41% 170.96 13.81% TOTAL BOOK ASSETS 546.11 100.00% 269.23 100.00% 274.17 100.00% 148.28 100.00% 271.02 100.00% 1237.79 100.00% OFF-BALANCE SHEET ITEMS .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% TOTAL ASSETS 546.11 100.00% 269.23 100.00% 274.17 100.00% 148.28 100.00% 271.02 100.00% 1,237.79 100.00%
EQUITY AND LIABILITIES ABC SECURIITIES DCZ HIGHVELD TETRAD COMPOSITE '2004 COMPOSITE '2005 ASSETS Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % TOTAL DEPOSITS 52.84 9.68% 179.17 66.55% 59.34 21.64% 8.70 5.87% 59.21 21.85% 300.04 24.24% DEMAND DEPOSITS 4.67 44.92 10.45 8.70 20.43 68.73 SAVINGS DEPOSITS .00 .00 .00 .00 1.16 .00 TIME DEPOSITS/FIXED DEPOSITS 48.17 .00 48.89 .00 37.54 97.06 FOREIGN CURRENCY DEPOSITS .00 .00 .00 .00 .00 .00 NEGOTIABLE CERTIFICATES OF DEPOSIT .00 134.26 .00 .00 .00 134.26 AMOUNTS OWING TO CENTRAL BANK 251.69 46.09% .00 0.00% .00 0.00% .00 0.00% .00 0.00% 251.69 20.33% DUE TO FINANCIAL INSTITUTIONS .00 0.00% .00 0.00% .00 0.00% .00 0.00% 109.14 40.27% .00 0.00% FOREIGN LIABILITIES .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% CAPITAL AND RESERVES 164.06 30.04% 47.83 17.77% 77.14 28.14% 73.23 49.38% 6.41 2.36% 362.25 29.27% OTHER LIABILITIES 77.53 14.20% 42.23 15.69% 137.69 50.22% 66.36 44.75% 96.26 35.52% 323.81 26.16% SUB-TOTAL 546.11 100.00% 269.23 100.00% 274.17 100.00% 148.28 100.00% 271.02 100.00% 1,237.79 100.00% OFF-BALANCE SHEET ITEMS - LIABILITIES .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% TOTAL EQUITY AND LIABILITIES 546.11 100.00% 269.23 100.00% 274.17 100.00% 148.28 100.00% 271.02 100.00% 1,237.79 100.00%
50 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 1 - STATISTICAL TABLES CONTINUED
TABLE 1E COMPOSITION OF THE BALANCE SHEET (As at 31 December, 2005) FINANCE HOUSES
ASSETS ABC ASSET SAGIT TRUSTFIN ZDB COMPOSITE '2004 COMPOSITE '2005 Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % CASH AND DUE FROM BANKS 481.70 46.37% .17 0.15% 30.45 12.47% 24.89 12.98% 128.38 46.54% 537.21 33.73% BALANCES WITH CENTRAL BANK 46.21 4.45% 47.40 40.24% 4.75 1.94% 26.93 14.05% 22.01 7.98% 125.29 7.87% FOREIGN CLAIMS .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% SECURITIES AND INVESTMENTS 470.71 45.31% 19.95 16.94% 139.11 56.97% 66.69 34.79% 73.76 26.74% 696.46 43.73% LOANS & ADVANCES 7.98 45.34 37.46 70.24 46.90 161.02 TOTAL PROVISIONS 2.06 4.42 1.90 19.68 6.65 28.06 NET LOANS & ADVANCES 5.92 0.57% 40.91 34.74% 35.57 14.56% 50.57 26.38% 40.25 14.59% 132.97 8.35% FIXED ASSETS 29.98 2.89% 7.54 6.40% 30.80 12.61% 2.38 1.24% 3.46 1.25% 70.70 4.44% OTHER ASSETS 4.35 0.42% 1.80 1.53% 1.56 0.64% 20.22 10.55% 8.02 2.91% 27.93 1.75% TOTAL BOOK ASSETS 1038.87 100.00% 117.78 100.00% 242.24 99.20% 191.67 100.00% 275.88 100.00% 1590.56 99.88% OFF-BALANCE SHEET ITEMS .00 0.00% .00 0.00% 1.96 0.80% .00 0.00% .00 0.00% 1.96 0.12% TOTAL ASSETS 1,038.87 100.00% 117.78 100.00% 244.20 100.00% 191.67 100.00% 275.88 100.00% 1,592.52 100.00%
EQUITY AND LIABILITIES ABC ASSET SAGIT TRUSTFIN ZDB COMPOSITE '2004 COMPOSITE '2005 Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % TOTAL DEPOSITS 752.08 72.39% 89.74 76.20% 145.19 59.45% 125.98 65.73% 198.73 72.04% 1,112.99 69.89% DEMAND DEPOSITS 37.29 .13 14.31 .00 1.37 51.73 SAVINGS DEPOSITS .00 .00 .00 .00 .00 .00 TIME DEPOSITS/FIXED DEPOSITS 714.79 89.61 130.88 125.98 175.43 1,061.26 FOREIGN CURRENCY DEPOSITS .00 .00 .00 .00 .00 .00 NEGOTIABLE CERTIFICATES OF DEPOSIT .00 .00 .00 .00 21.94 .00 AMOUNTS OWING TO CENTRAL BANK .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% .00 0.00% DUE TO FINANCIAL INSTITUTIONS .00 0.00% .00 0.00% .03 0.01% .00 0.00% 2.70 0.98% .03 0.00% FOREIGN LIABILITIES .00 0.00% .00 0.00% .00 0.00% .00 0.00% 4.15 1.50% .00 0.00% CAPITAL AND RESERVES 140.03 13.48% 17.12 14.53% 45.40 18.59% 29.56 15.42% 29.03 10.52% 232.10 14.57% OTHER LIABILITIES 146.76 14.13% 10.92 9.27% 51.62 21.14% 36.13 18.85% 41.27 14.96% 245.44 15.41% SUB-TOTAL 1,038.87 100.00% 117.78 100.00% 242.24 99.20% 191.67 100.00% 275.88 100.00% 1,590.56 99.88% OFF-BALANCE SHEET ITEMS - LIABILITIES .00 0.00% .00 0.00% 1.96 0.80% .00 0.00% .00 0.00% 1.96 0.12% TOTAL EQUITY AND LIABILITIES 1,038.87 100.00% 117.78 100.00% 244.20 100.00% 191.67 100.00% 275.88 100.00% 1,592.52 100.00%
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 51
APPENDIX 1 - STATISTICAL TABLES CONTINUED
TABLE 1F COMPOSITION OF THE BALANCE SHEET (As at 31 December, 2005)
CONSOLIDATED BALANCE SHEETS
ASSETS COMMERCIAL BANKS MERCHANT BANKS BUILDING SOCIETIES DISCOUNT HOUSES FINANCE HOUSES COMPOSITE 2005 Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion %
CASH AND DUE FROM BANKS 2,923.25 3.39% 811.86 9.90% 474.28 6.10% 22.98 1.86% 537.21 33.73% 4,769.59 4.54% BALANCES WITH CENTRAL BANK 14,821.14 17.17% 289.54 3.53% 686.88 8.83% 106.92 8.64% 125.29 7.87% 16,029.77 15.24% FOREIGN CLAIMS 15,057.12 17.44% 376.00 4.58% .00 0.00% .00 0.00% .00 0.00% 15,433.12 14.68% SECURITIES AND INVESTMENTS 21,589.83 25.01% 4,251.20 51.82% 3,057.08 39.30% 868.73 70.18% 696.46 43.73% 30,463.31 28.97% LOANS & ADVANCES 14,875.16 871.56 805.22 12.84 161.02 16,725.80 TOTAL PROVISIONS 1,402.46 64.87 14.79 .00 28.06 1,510.17 NET LOANS & ADVANCES 13,472.70 15.60% 806.69 9.83% 790.43 10.16% 12.84 1.04% 132.97 8.35% 15,215.63 14.47% FIXED ASSETS 2,530.66 2.93% 487.28 5.94% 2,261.00 29.06% 55.36 4.47% 70.70 4.44% 5,405.01 5.14% OTHER ASSETS 7,629.33 8.84% 890.47 10.85% 510.01 6.56% 170.96 13.81% 27.93 1.75% 9,228.69 8.78% TOTAL BOOK ASSETS 78024.03 90.37% 7913.05 96.45% 7779.68 100.00% 1237.79 100.00% 1590.56 99.88% 96545.11 91.82% OFF-BALANCE SHEET ITEMS 8,312.82 9.63% 291.27 3.55% .00 0.00% .00 0.00% 1.96 0.12% 8,606.05 8.18% TOTAL ASSETS 86,336.85 100.00% 8,204.31 100.00% 7,779.68 100.00% 1,237.79 100.00% 1,592.52 100.00% 105,151.16 100.00%
EQUITY AND LIABILITIES COMMERCIAL BANKS MERCHANT BANKS BUILDING SOCIETIES DISCOUNT HOUSES FINANCE HOUSES COMPOSITE 2005 Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion %
TOTAL DEPOSITS 44,437.55 51.47% 3,447.97 42.03% 4,524.77 58.16% 300.04 24.24% 1,112.99 69.89% 53,823.32 51.19% DEMAND DEPOSITS 23,127.40 205.26 451.29 68.73 51.73 23,904.40 SAVINGS DEPOSITS 4,291.48 26.69 2,073.30 .00 .00 6,391.46 TIME DEPOSITS/FIXED DEPOSITS 4,948.68 2,894.37 1,818.27 97.06 1,061.26 10,819.64 FOREIGN CURRENCY DEPOSITS 11,922.89 321.65 .00 .00 .00 12,244.54 NEGOTIABLE CERTIFICATES OF DEPOSIT 147.10 .00 181.92 134.26 .00 463.27 AMOUNTS OWING TO CENTRAL BANK 4,146.61 4.80% 205.69 2.51% .00 0.00% 251.69 20.33% .00 0.00% 4,603.99 4.38% DUE TO FINANCIAL INSTITUTIONS 2,117.23 2.45% 601.03 7.33% .00 0.00% .00 0.00% .03 0.00% 2,718.30 2.59% FOREIGN LIABILITIES 3,222.92 3.73% 157.33 1.92% .00 0.00% .00 0.00% .00 0.00% 3,380.25 3.21% CAPITAL AND RESERVES 10,758.55 12.46% 866.82 10.57% 2,199.22 28.27% 362.25 29.27% 232.10 14.57% 14,418.95 13.71% OTHER LIABILITIES 13,291.19 15.39% 2,634.21 32.11% 1,054.82 13.56% 323.81 26.16% 245.44 15.41% 17,549.46 16.69% SUB-TOTAL 77,974.06 90.31% 7,913.05 96.45% 7,778.80 99.99% 1,237.79 100.00% 1,590.56 99.88% 96,494.26 91.77% OFF-BALANCE SHEET ITEMS - LIABILITIES 8,362.79 9.69% 291.27 3.55% .88 0.01% .00 0.00% 1.96 0.12% 8,656.90 8.23% TOTAL EQUITY AND LIABILITIES 86,336.85 100.00% 8,204.31 100.00% 7,779.68 100.00% 1,237.79 100.00% 1,592.52 100.00% 105,151.16 100.00%
52 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005
APPENDIX 2 - STATISTICAL TABLES
TABLE 2A COMPOSITION OF INCOME STATEMENTS (31 DECEMBER 2005)
COMMERCIAL BANKS (Figures in ZW$ billions)
ITEM AGRIBANK BARCLAYS CBZ FBC KINGDOM MBCA BANK METRO NMB STANBIC STANCHART ZABG ZIMBANK TOTAL
Total Interest Income 1,145.82 3,479.03 4,407.03 900.65 707.92 2,565.13 199.21 699.09 1,712.41 2,299.72 659.86 3,882.96 22,658.85 Loans and Leases 711.46 880.61 1,751.22 189.68 225.00 300.09 134.72 257.69 555.73 944.80 232.62 708.17 6,891.78 Securities and Investments 434.36 2,570.92 2,608.74 690.48 482.89 2,255.75 64.50 437.61 1,072.01 1,321.79 314.67 3,165.14 15,418.85 Deposit Balances and Other Interest Income - 27.50 47.08 20.49 0.03 9.30 - 3.80 84.67 33.13 112.56 9.65 348.21
Total Interest Expenses 271.91 1,169.78 1,770.42 278.09 359.94 1,887.74 62.85 409.26 266.68 247.12 78.30 2,176.66 8,978.76 Deposits 17.19 927.63 1,473.25 9.07 359.94 1,831.80 55.13 163.87 77.06 64.28 74.30 295.13 5,348.65 Borrowed Funds - 241.43 262.24 80.68 - 20.35 7.73 239.56 189.51 182.84 4.00 467.26 1,695.61 Other Interest Expenses 254.73 0.72 34.93 188.34 - 35.59 - 5.83 0.11 - 0.00 1,414.27 1,934.50
Net Interest Income 873.90 2,309.25 2,636.62 622.56 347.98 677.40 136.36 289.83 1,445.73 2,052.61 581.56 1,706.30 13,680.09
Total Provisions For Current Period 401.20 101.28 205.39 36.19 56.34 35.55 (19.29) 32.56 93.93 322.54 36.37 29.47 1,331.54
Total Non - Interest Income 83.07 557.34 459.99 434.26 124.04 762.09 10.92 456.76 1,502.40 1,080.76 160.50 616.16 6,248.30 Fees, Commission and Service Charges 77.46 405.40 551.48 149.89 53.91 113.01 10.92 52.95 124.26 563.04 23.01 294.54 2,419.88 Foreign Exchange Fees and Commission 0.31 147.03 9.35 205.15 49.52 378.59 - - 427.00 252.02 2.23 287.30 1,758.51 Other Non Interest Income 5.30 4.91 (100.84) 79.22 20.61 270.49 - 403.81 951.15 265.69 135.27 34.32 2,069.91
Total Non - Interest Expenses 407.41 881.22 623.48 365.31 334.19 246.13 105.51 226.35 648.02 781.65 389.69 910.41 5,919.38 Salaries and Employee Benefits 241.92 563.25 422.27 254.63 193.45 171.25 46.50 11.32 242.41 492.90 204.01 648.64 3,492.54 Occupancy - Net of Rental 59.06 11.71 13.91 14.85 15.14 4.61 2.55 1.87 1.56 42.31 38.01 23.52 229.09 Other Non Interest Expences 106.43 306.26 187.30 95.84 125.61 70.27 56.46 213.17 404.05 246.44 147.67 238.25 2,197.75
Net Income (Loss) before Taxation and Extraordinary Items 148.35 1,884.09 2,267.75 655.31 81.48 1,157.81 61.07 487.67 2,206.18 2,029.17 316.00 1,382.58 12,677.47 Taxation 71.00 708.78 777.92 247.03 33.35 412.16 26.56 162.84 797.12 750.04 115.23 411.87 4,513.89 Net Income / (Loss) after Taxation before Extraordinasry Items 77.35 1,175.31 1,489.83 408.28 48.13 745.65 34.51 324.83 1,409.07 1,279.13 200.77 970.71 8,163.59 Extraordinary Items - - - - 4.22 ------37.14 41.36 Net Income / (Loss) 77.35 1,175.31 1,489.83 408.28 43.91 745.65 34.51 324.83 1,409.07 1,279.13 200.77 933.57 8,122.22 Dividends - 86.28 - 15.89 - 11.49 - - - - 51.64 - 165.30 Retained Earnings 77.35 1,089.03 1,489.83 392.40 43.91 734.16 34.51 324.83 1,409.07 1,279.13 149.13 933.57 7,956.93
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 53 APPENDIX 2 - STATISTICAL TABLES CONTINUED
TABLE 2B COMPOSITION OF INCOME STATEMENTS (31 DECEMBER 2005)
MERCHANT BANKS (Figures in ZW$ billions)
ITEM ABC GENESIS INTERFIN PREMIER RENAISSANCE TOTAL
Total Interest Income 743.27 664.40 324.07 519.58 147.97 2,399.29 Loans and Leases 27.72 13.44 16.51 70.16 65.69 193.53 Securities and Investments 590.53 650.34 307.56 388.81 82.28 2,019.52 Deposit Balances and Other Interest Income 125.01 0.61 0.00 60.62 - 186.24
Total Interest Expenses 450.67 485.12 263.65 403.58 25.18 1,628.20 Deposits 450.67 0.42 263.16 401.77 25.18 1,141.20 Borrowed Funds - - 0.49 - - 0.49 Other Interest Expenses - 484.70 - 1.81 - 486.50
Net Interest Income 292.59 179.28 60.42 116.01 122.79 771.09
Total Provisions For Current Period 32.53 3.97 30.12 6.70 21.23 94.55
Total Non - Interest Income 326.63 33.40 184.57 155.27 86.78 786.65 Fees, Commission and Service Charges 5.25 - 0.38 - - 5.63 Foreign Exchange Fees and Commission 19.01 23.14 52.10 7.23 35.21 136.70 Other Non Interest Income 302.36 10.26 132.09 148.04 51.57 644.33
Total Non - Interest Expenses 249.09 65.72 132.01 104.40 78.07 629.28 Salaries and Employee Benefits 173.97 41.16 72.04 46.63 46.87 380.66 Occupancy - Net of Rental 1.29 1.93 5.87 5.88 9.76 24.73 Other Non Interest Expences 73.84 22.62 54.10 51.89 21.44 223.89
Net Income (Loss) before Taxation and Extraordinary Items 337.60 142.99 82.87 160.17 110.27 833.91 Taxation 117.02 50.88 23.92 55.81 40.62 288.25 Net Income / (Loss) after Taxation before Extraordinasry Items 220.58 92.11 58.95 104.36 69.65 545.66 Extraordinary Items ------Net Income / (Loss) 220.58 92.11 58.95 104.36 69.65 545.66 Dividends - - 21.00 22.00 - 43.00 Retained Earnings 220.58 92.11 37.95 82.36 69.65 502.66
54 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 2 - STATISTICAL TABLES CONTINUED
TABLE 2C COMPOSITION OF INCOME STATEMENTS (31 DECEMBER 2005)
BUILDING SOCIETIES (Figures in ZW$ billions)
ITEM BEVERLEY CABS INTERMARKET FBC BS* TOTAL
Total Interest Income 475.73 1,531.44 92.25 262.93 2,362.35 Loans and Leases 36.62 221.41 14.40 13.05 285.49 Securities and Investments 439.11 1,310.03 77.84 249.88 2,076.86 Deposit Balances and Other Interest Income - - - - -
Total Interest Expenses 137.50 934.07 7.54 118.45 1,197.57 Deposits 137.50 934.07 7.02 118.45 1,197.05 Borrowed Funds - - - - - Other Interest Expenses - - 0.52 - 0.52
Net Interest Income 338.23 597.37 84.70 144.48 1,164.78
Total Provisions For Current Period 24.52 164.85 - 0.63 190.01
Total Non - Interest Income 11.60 533.80 45.21 31.38 621.99 Fees, Commission and Service Charges - - - - - Foreign Exchange Fees and Commission 34.75 71.33 35.67 11.89 153.64 Other Non Interest Income (23.15) 462.47 9.54 19.49 468.35
Total Non - Interest Expenses 164.84 353.66 141.52 62.92 722.94 Salaries and Employee Benefits 100.28 184.71 75.64 33.69 394.32 Occupancy - Net of Rental (1.26) 9.16 3.79 4.96 16.65 Other Non Interest Expences 65.83 159.78 62.09 24.28 311.97
Net Income (Loss) before Taxation and Extraordinary Items 160.46 612.66 (11.61) 112.31 873.83 Taxation 9.46 - - - 9.46 Net Income / (Loss) after Taxation before Extraordinasry Items 150.99 612.66 (11.61) 112.31 864.36 Extraordinary Items - - - - - Net Income / (Loss) 150.99 612.66 (11.61) 112.31 864.36 Dividends - - - - - Retained Earnings 150.99 612.66 (11.61) 112.31 864.36
* Formerly Zimbabwe Building Society (ZBS)
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 55 APPENDIX 2 - STATISTICAL TABLES CONTINUED
TABLE 2D COMPOSITION OF INCOME STATEMENTS (31 DECEMBER 2005)
DISCOUNT HOUSES (Figures in ZW$ billions)
ITEM ABC SECURITIES DCZ HIGHVELD TETRAD TOTAL
Total Interest Income 417.63 135.89 132.75 77.18 763.44 Loans and Leases - - - 0.11 0.11 Securities and Investments 377.27 135.89 132.75 76.65 722.55 Deposit Balances and Other Interest Income 40.36 - - 0.41 40.78
Total Interest Expenses 262.97 39.27 32.81 2.38 337.43 Deposits 262.97 39.27 32.81 2.38 337.43 Borrowed Funds - - - - - Other Interest Expenses - - - - -
Net Interest Income 154.66 96.62 99.93 74.80 426.01
Total Provisions For Current Period - - - - -
Total Non - Interest Income 90.11 0.15 - 28.26 118.52 Fees, Commission and Service Charges - - - - - Foreign Exchange Fees and Commission 0.00 0.15 - - 0.15 Other Non Interest Income 90.11 - - 28.26 118.37
Total Non - Interest Expenses 34.17 51.96 10.08 34.45 130.66 Salaries and Employee Benefits 18.56 13.14 4.72 16.59 53.01 Occupancy - Net of Rental 0.81 0.36 0.46 0.75 2.38 Other Non Interest Expenses 14.79 38.46 4.90 17.12 75.27
Net Income (Loss) before Taxation and Extraordinary Items 210.60 44.81 89.85 68.61 413.87 Taxation 69.05 16.70 18.71 23.25 127.72 Net Income / (Loss) after Taxation before Extraordinary Items 141.55 28.11 71.14 45.36 286.16 Extraordinary Items - - - - - Net Income / (Loss) 141.55 28.11 71.14 45.36 286.16 Dividends - - - - - Retained Earnings 141.55 28.11 71.14 45.36 286.16
56 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 2 - STATISTICAL TABLES CONTINUED
TABLE 2E COMPOSITION OF INCOME STATEMENTS (31 DECEMBER 2005)
FINANCE HOUSES (Figures in ZW$ billions)
ITEM ABC ASSET SAGIT TRUSTFIN ZDB TOTAL
Total Interest Income 555.46 62.03 86.02 154.78 858.28 Loans and Leases 8.01 22.12 29.13 38.82 98.07 Securities and Investments 432.50 39.38 56.89 115.95 644.72 Deposit Balances and Other Interest Income 114.95 0.53 0.00 0.00 115.49
Total Interest Expenses 421.39 35.17 75.63 113.67 645.85 Deposits 421.39 35.17 74.32 112.76 643.64 Borrowed Funds - - 1.31 0.87 2.18 Other Interest Expenses - - - 0.04 0.04
Net Interest Income 134.07 26.86 10.39 41.11 212.43 - - Total Provisions For Current Period 0.90 1.54 2.81 9.48 14.74
Total Non - Interest Income 74.20 0.01 2.26 2.78 79.26 Fees, Commission and Service Charges - - - - - Foreign Exchange Fees and Commission - 0.01 1.05 2.78 3.84 Other Non Interest Income 74.20 - 1.21 - 75.41
Total Non - Interest Expenses 50.42 16.53 22.39 17.49 106.83 Salaries and Employee Benefits 28.21 7.00 13.75 9.58 58.54 Occupancy - Net of Rental 1.99 0.77 0.96 0.21 3.92 Other Non Interest Expenses 20.22 8.76 7.68 7.70 44.36
Net Income (Loss) before Taxation and Extraordinary Items 156.95 8.80 (12.55) 16.92 170.12 Taxation 48.56 - (4.11) - 44.45 Net Income / (Loss) after Taxation before Extraordinary Items 108.39 8.80 (8.44) 16.92 125.67 Extraordinary Items - - - - - Net Income / (Loss) 108.39 8.80 (8.44 ) 16.92 125.67 Dividends - - - - - Retained Earnings 108.39 8.80 (8.44 ) 16.92 125.67
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 57 APPENDIX 2 - STATISTICAL TABLES CONTINUED
TABLE 2F CONSOLIDATED INCOME STATEMENTS ( 31 DECEMBER 2005)
(Figures in ZW$ billions)
ITEM COMMERCIAL MERCHANT BUILDING DISCOUNT FINANCE TOTAL SOCIETIES HOUSES HOUSES
Total Interest Income 22,658.85 2,399.29 2,362.35 763.44 858.28 29,042.21 Loans and Leases 6,891.78 193.53 285.49 0.11 98.07 7,468.98 Securities and Investments 15,418.85 2,019.52 2,076.86 722.55 644.72 20,882.51 Deposit Balances and Other Interest Income 348.21 186.24 - 40.78 115.49 690.71
Total Interest Expenses 8,978.76 1,628.20 1,197.57 337.43 645.85 12,787.81 Deposits 5,348.65 1,141.20 1,197.05 337.43 643.64 8,667.97 Borrowed Funds 1,695.61 0.49 - - 2.18 1,698.28 Other Interest Expenses 1,934.50 486.50 0.52 - 0.04 2,421.56
Net Interest Income 13,680.09 771.09 1,164.78 426.01 212.43 16,254.40
Total Provisions For Current Period 1,331.54 94.55 190.01 - 14.74 1,630.83
Total Non - Interest Income 6,248.30 786.65 621.99 118.52 79.26 7,854.72 Fees, Commission and Service Charges 1,758.51 5.63 - - - 1,764.13 Foreign Exchange Fees and Commission 2,419.88 136.70 153.64 0.15 3.84 2,714.22 Other Non Interest Income 2,069.91 644.33 468.35 118.37 75.41 3,376.37
Total Non - Interest Expenses 5,919.38 629.28 722.94 130.66 106.83 7,509.10 Salaries and Employee Benefits 3,492.54 380.66 394.32 53.01 58.54 4,379.08 Occupancy - Net of Rental 229.09 24.73 16.65 2.38 3.92 276.78 Other Non Interest Expenses 2,197.75 223.89 311.97 75.27 44.36 2,853.24
Net Income (Loss) before Taxation and Extraordinary Items 12,677.47 833.91 873.83 413.87 170.12 14,969.20 Taxation 4,513.89 288.25 9.46 127.72 44.45 4,983.77 Net Income / (Loss) after Taxation before Extraordinary Items 8,163.59 545.66 864.36 286.16 125.67 9,985.43 Extraordinary Items 41.36 - - - - 41.36 Net Income / (Loss) 8,122.22 545.66 864.36 286.16 125.67 9,944.07 Dividends 165.30 43.00 - - - 208.30 Retained Earnings 7,956.93 502.66 864.36 286.16 125.67 9,735.77
58 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 3 - STATISTICAL TABLES
TABLE 3A COMPOSITION OF THE BALANCE SHEET - ASSET MANAGEMENT COMPANIES (As at 31 December, 2005)
ABC ALPHA DATVEST EQUIVEST FIDELITY IMARA INFINITY KINGDOM LEGEND MBCA ASSETS Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions %
FIXED ASSETS 0.27 0.98 0.86 14.43 2.85 1.35 2.83 14.78 1.37 8.79 19.50 34.18 7.14 40.97 0.80 3.55 0.45 7.37 0.17 2.06 OWN ASSETS 0.27 0.98 0.86 14.43 2.85 1.35 - - 1.37 8.79 19.50 34.18 7.14 40.97 0.80 3.55 0.45 7.37 0.71 8.59 LONG TERM ASSETS 3.50 12.74 - 26.14 12.38 - - 0.29 1.83 - - 2.38 13.67 - - - - 0.57 6.89 CURRENT ASSETS 23.71 86.28 5.10 85.57 182.11 86.27 16.31 85.22 13.93 89.38 37.55 65.82 7.90 45.36 21.71 96.45 5.66 92.63 7.53 91.05 CASH & BANK BALANCES 0.10 0.35 0.29 4.92 19.86 9.41 4.76 24.85 0.10 0.67 - 0.09 0.50 0.17 0.76 0.02 0.38 0.36 4.35 DEBTORS - - 1.25 21.04 48.21 22.84 0.39 2.03 5.50 35.28 17.18 30.12 0.15 0.84 4.05 18.00 0.39 6.39 2.77 33.49 RELATED PARTIES ------SHORT TERM INVESTMENTS 23.61 85.93 3.55 59.61 114.04 54.02 11.12 58.07 8.33 53.45 20.37 35.70 7.67 44.01 17.49 77.69 5.25 85.87 4.40 53.20 TOTAL ASSETS 27.48 100 5.96 100 211.09 100 19.14 100 15.59 100 57.05 100 17.43 100 22.51 100 6.11 100 8.27 100
LIABILITIES
CAPITAL 8.89 32.34 3.51 58.91 132.39 62.72 17.53 91.56 10.97 70.34 25.44 44.59 14.23 81.66 14.93 66.33 3.82 62.56 3.55 42.93 SHARE CAPITAL 0.01 0.04 0.00 0.00 0.01 0.00 0.00 0.00 6.96 44.65 0.00 0.00 0.02 0.09 0.01 0.03 0.50 8.19 0.02 0.24 SHARE PREMIUM 0.49 1.80 0.50 8.42 35.50 16.82 0.78 4.05 - - 10.50 18.40 0.83 4.74 0.50 2.21 0.00 0.05 0.50 6.05 RESERVES ------2.92 15.24 - - 1.09 1.90 3.72 21.34 ------RETAINED EARNINGS 8.38 30.50 3.01 50.49 96.89 45.90 13.84 72.27 4.01 25.69 13.85 24.28 9.67 55.48 14.43 64.09 3.32 54.32 3.03 36.64 OTHER ------DEBT 10.73 39.05 - - - - - 0.46 2.93 5.20 9.11 1.77 10.16 - 0.03 0.49 - - CURRENT LIABILITIES 7.86 28.61 2.45 41.09 78.71 37.28 1.62 8.44 4.17 26.72 26.41 46.30 1.43 8.19 7.58 33.67 2.26 36.95 4.72 57.07 DIVIDEND PAYABLE ------TAXATION 5.15 18.74 - - 59.36 28.12 0.47 2.47 0.22 1.44 8.99 15.75 1.40 8.05 3.12 13.86 1.33 21.76 1.39 16.81 RELATED PARTIES 2.71 9.86 ------0.80 1.40 - - 0.10 0.46 - - - - CREDITORS - - 1.81 30.35 19.34 9.16 0.36 1.88 2.84 18.23 16.63 29.15 0.01 0.05 3.68 16.34 0.23 3.80 3.33 40.27 PROVISIONS - - 0.64 10.74 - - 0.78 4.09 1.10 7.06 - 0.02 0.09 0.68 3.01 0.70 11.39 - - TOTAL LIABILITIES & CAPITAL 27.48 100 5.96 100 211.09 100.00 19.14 100.00 15.59 100.00 57.05 100.00 17.43 100.00 22.51 100.00 6.11 100.00 8.27 100.00
TABLE 3A (CONTINUED) COMPOSITION OF THE BALANCE SHEET - ASSET MANAGEMENT COMPANIES (As at 31 December, 2005)
OLD MUTUAL PATNEL PREMIER PURPOSE SYFRETS TFS TN ZIMNAT COMPOSITE 2004 COMPOSITE 2005 ASSETS Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions %
FIXED ASSETS 3.72 8.98 4.92 81.29 8.26 33.41 20.82 48.07 37.15 39.30 - - 0.17 4.99 2.07 12.16 11.89 7.15 73.02 13.34 OWN ASSETS 3.72 8.98 4.92 81.29 8.26 33.41 20.82 48.07 37.15 39.30 - - 0.17 4.99 2.07 12.16 11.89 7.15 70.74 13.02 LONG TERM ASSETS ------12.29 28.37 - - 5.77 25.71 - 0.32 1.88 9.50 5.71 38.96 7.17 CURRENT ASSETS 37.69 91.02 1.13 18.71 16.46 66.59 10.20 23.56 57.38 60.70 16.66 74.29 3.31 95.01 14.63 85.96 145.04 87.15 431.22 79.38 CASH & BANK BALANCES 9.45 22.82 1.08 17.90 0.00 0.00 - - 8.07 8.54 3.94 17.56 0.35 10.05 1.05 6.17 0.26 0.16 49.69 9.15 DEBTORS 11.00 26.57 - - 1.52 6.17 2.11 4.88 8.55 9.04 1.97 8.77 0.68 19.48 6.85 40.25 11.40 6.35 93.27 17.17 RELATED PARTIES 17.22 41.59 ------0.84 4.94 9.02 5.42 18.06 3.32 SHORT TERM INVESTMENTS 0.02 0.05 0.05 0.80 14.94 60.42 8.09 18.68 40.76 43.12 10.76 47.96 2.28 65.47 5.89 34.61 124.36 74.72 270.14 49.73 TOTAL ASSETS 41.40 100 6.05 100 24.72 100 43.31 100 94.53 100 22.43 100 3.48 100 17.02 100 166.43 100 543.20 100
LIABILITIES
CAPITAL 12.95 31.28 5.48 90.70 17.03 68.88 30.64 70.73 50.08 52.98 13.56 60.43 2.83 81.29 12.61 74.07 62.46 37.53 324.34 59.7 SHARE CAPITAL - - 0.94 15.56 0.00 0.00 0.01 0.01 0.03 0.03 0.50 2.23 0.48 13.67 0.01 0.06 4.76 2.86 9.48 1.7 SHARE PREMIUM 10.50 25.36 - - 3.16 12.78 3.16 7.29 2.01 2.13 - - 0.54 15.36 4.23 24.84 13.57 8.15 59.53 11.0 RESERVES - - 0.28 4.56 1.45 5.87 12.78 29.50 - - - - 0.32 9.27 1.98 11.63 6.33 3.80 10.67 2.0 RETAINED EARNINGS 2.45 5.92 (0.09) (1.47) 12.42 50.23 14.70 33.93 48.04 50.82 13.06 58.20 1.50 42.99 6.39 37.54 37.77 22.70 240.32 44.2 OTHER - - 4.36 72.04 ------0.02 0.01 4.36 0.8 DEBT ------0.03 0.18 19.15 11.50 13.02 2.4 CURRENT LIABILITIES 28.45 68.72 0.56 9.30 7.69 31.12 12.68 29.27 44.45 47.02 8.88 39.57 0.65 18.71 4.38 25.75 84.83 50.97 205.84 37.9 DIVIDEND PAYABLE 0.23 0.54 ------0.23 - TAXATION 15.20 36.72 - - - - 5.82 13.44 12.62 13.35 2.13 9.48 0.65 18.67 3.17 18.63 25.40 15.26 106.22 19.6 RELATED PARTIES 1.31 3.17 ------4.89 21.82 0.00 0.00 - - 3.56 2.14 9.02 1.7 CREDITORS 3.46 8.36 0.56 9.30 7.34 29.71 6.86 15.83 5.67 6.00 1.84 8.19 0.00 0.04 1.21 7.12 11.68 7.02 51.69 9.5 PROVISIONS 8.25 19.93 - - 0.35 1.41 - - 26.16 27.67 0.02 0.09 - - - - 44.11 26.50 38.69 7.1 TOTAL LIABILITIES & CAPITAL 41.40 100.00 6.05 100.00 24.72 100.00 43.31 100.00 94.53 100.00 22.43 100.00 3.48 100.00 17.02 100.00 166.43 100.00 543.20 100.00
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 59 APPENDIX 3 - STATISTICAL TABLES CONTINUED 2005 8.20 65.94 40.88 COMP 106.35 275.69 267.49 105.77 171.71 382.03 258.35 551.34 282.64 2004 2.93 33.01 23.06 54.19 20.30 31.27 64.96 77.85 33.69 18.27 COMP 141.97 117.57 - ABC 6.23 3.18 9.30 6.12 14.65 14.65 20.88 30.18 15.49 14.69 - 2.44 2.47 4.25 9.90 2.24 4.11 5.65 6.99 1.10 12.11 (0.26) ALPHA - 7.41 41.39 73.04 73.04 19.42 26.84 21.56 TVEST 114.43 141.27 119.70 A D , 2005) - 0.52 1.18 1.48 2.66 0.42 4.23 13.34 13.84 13.86 16.52 11.87 UIVEST EQ - 3.87 1.30 4.01 3.96 2.51 5.17 8.58 9.28 11.24 15.20 17.86 FIDELITY 7.00 8.52 3.15 3.33 22.53 11.60 13.30 33.04 34.13 15.16 48.68 IMARA - ANIES (As at 31 December 9.53 9.68 1.38 5.01 1.31 6.32 9.41 7.83 10.91 17.23 INFINITY - 6.23 0.06 7.34 9.66 13.48 13.48 19.71 12.51 29.37 16.86 KINGDOM - GEMENT COMP 4.09 0.27 4.09 2.20 0.68 2.88 4.36 3.51 7.20 3.69 LEGENT - 2.66 1.55 2.66 4.17 3.15 7.32 1.88 4.20 8.48 1.17 11.53 MBCA ABLE 3B SET MANA T 2.22 19.60 31.07 14.97 13.19 21.58 34.77 46.04 79.61 17.28 33.00 OMAM - - 0.33 0.33 0.06 0.37 0.43 0.33 0.76 0.59 0.16 TNEL A P TEMENT - AS A 1.20 4.78 3.58 5.24 6.58 3.87 8.64 6.06 11.82 20.46 13.38 PREMIER - - - 3.85 3.37 7.21 14.18 14.18 14.18 21.39 21.39 PURPOSE - 8.23 47.50 47.50 15.15 21.05 58.67 23.38 22.69 82.05 42.30 17.06 SYFRETS TFS 9.65 7.73 2.42 3.93 12.29 12.29 14.71 17.39 13.89 14.29 32.10 - TN 1.35 1.50 3.51 1.63 0.68 2.03 4.65 0.95 1.42 2.98 5.35 COMPOSITION OF THE INCOME ST - T A 3.70 5.69 1.06 5.42 15.01 15.01 10.84 20.70 14.54 28.76 35.25 ZIMN ALS) Y ITEMS YEE BENEFITS O X ORDINAR TION AND RENT X A A A TR TER T es in ZW$ Billions AL EXPENSES AL INCOME AINED EARNINGS XES AND EX A PROFIT AF DIVIDENDS RET OTHER (DEPRECIA SALARIES AND EMPL T PROFIT BEFORE T TOT OTHER INCOME SECURITIES AND INVESTMENT INCOME FEE- INCOME Figur TOT
60 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 3 - STATISTICAL TABLES CONTINUED
TABLE 3C COMPOSITION OF THE NOMINEE BALANCE SHEET - ASSET MANAGEMENT COMPANIES (As at 31 December, 2005)
ASSETS ZIMNAT TN TFS SYFRETS PURPOSE PREMIER PATNEL OLD MUTUAL MBCA LEGEND Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion %
CASH - - 0.18 0.14 1.08 0.07 10.28 1.82 - - - - 1.08 12.05 1,076.48 1.77 10.28 1.82 1.24 3.42 MONEY MARKET 87.93 7.24 134.25 99.46 80.82 5.00 39.80 7.04 258.43 98.71 645.09 98.27 7.90 87.95 4,984.59 8.18 39.80 7.04 29.46 81.17 BONDS 24.79 2.04 - - - - 14.06 2.49 ------1,013.46 1.66 14.06 2.49 - - EQUITIES QUOTED 1,018.32 83.79 0.55 0.41 1,524.41 94.40 369.95 65.45 3.39 1.29 11.34 1.73 - - 46,639.02 76.51 369.95 65.45 5.59 15.40 EQUTIES UNQUOTED 37.30 3.07 - - 7.91 0.49 ------11.74 0.02 - - - - PROPERTY 47.00 3.87 ------7,235.02 11.87 - - - - NON PERFOMING ASSETS - - - - 0.61 0.04 ------OTHER ------TOTAL INVESTMENTS 1,215.35 100.00 134.98 100.00 1,614.82 100.00 565.21 100.00 261.82 100.00 656.43 100.00 8.99 100.00 60,960.32 100.00 565.21 100.00 36.30 100.00
LIABILITIES Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion %
CLIENTS FUNDS ( TOP 20) 1,075.49 88.49 119.70 88.68 1,161.05 71.90 415.20 73.46 261.82 100.00 202.89 30.91 8.46 94.19 49,783.27 81.67 415.20 73.46 30.35 83.63 OTHER CLIENT FUNDS 139.85 11.51 15.28 11.32 453.77 28.10 19.68 3.48 0.00 0.00 453.54 69.09 0.52 5.81 11,177.04 18.33 19.68 3.48 5.94 16.37 UNIT TRUSTS 130.33 130.33 TOTAL CLIENTS FUNDS 1,215.35 100.00 134.98 100.00 1,614.82 100.00 565.21 100.00 261.82 100.00 656.43 100.00 8.99 100.00 60,960.32 100.00 565.21 100.00 36.30 100.00
TABLE 3C (CONTINUED) COMPOSITION OF THE NOMINEE BALANCE SHEET - ASSET MANAGEMENT COMPANIES (As at 31 December, 2005)
ASSETS KINGDON INFINITY IMARA FIDELITY EQUIVEST DATVEST ALPHA ABC COMPOSITE '2004 COMPOSITE '2005 Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion % Z$ billion %
CASH 49.03 6.60 27.18 49.77 79.92 0.77 - - 3.07 0.47 1.40 0.03 0.76 1.51 81.51 2.72 71.19 1.16 1,343.50 1.56 MONEY MARKET 236.77 31.88 23.95 43.86 574.82 5.52 47.40 23.60 65.90 10.00 583.15 11.80 42.34 83.67 111.87 3.73 1,570.31 25.64 7,994.26 9.29 BONDS 45.46 6.12 - - 83.15 0.80 0.05 0.03 ------71.62 2.39 183.98 3.00 1,266.66 1.47 EQUITIES QUOTED 398.26 53.63 3.48 6.37 9,330.98 89.66 153.41 76.38 589.89 89.53 4,357.62 88.17 8.26 16.33 2,728.08 91.01 3,341.00 54.55 67,512.51 78.44 EQUTIES UNQUOTED ------23.20 0.38 56.95 0.07 PROPERTY 6.51 0.88 - - 338.89 3.26 ------4.42 0.15 920.21 15.03 7,631.83 8.87 NON PERFOMING ASSETS ------10.92 0.18 0.61 0.00 OTHER 6.58 0.89 - - 0.00 0.00 ------3.66 0.06 6.58 0.01 TOTAL INVESTMENTS 742.61 100.00 54.61 100.00 10,407.00 100.00 200.85 100.00 658.86 100.00 4,942.17 100.00 50.60 100.00 2,997.51 100.00 6,124.49 100.00 86,073.63 100.00
LIABILITIES Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions % Z$ Billions %
CLIENTS FUNDS ( TOP 20) 333.61 44.92 46.16 84.53 5,468.84 52.55 191.22 95.20 610.62 92.68 3,808.09 77.05 37.98 75.06 2,452.35 81.81 4,777.10 78.00 86,073.63 100.00 OTHER CLIENT FUNDS 409.00 55.08 8.45 15.47 4,938.04 47.45 9.64 4.80 48.24 7.32 1,134.07 22.95 12.62 24.94 545.15 18.19 1,347.39 22.00 86,073.63 100.00 UNIT TRUSTS 86,073.63 TOTAL CLIENTS FUNDS 742.61 100.00 54.61 100.00 10,407.00 100.00 200.85 100.00 658.86 100.00 4,942.17 100.00 50.60 100.00 2,997.51 100.00 6,124.49 100.00 86,073.63 100.00
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 61 APPENDIX 4 FINANCIAL INSTITUTIONS RATINGS AS AT 31 DECEMBER 2004
Institution Short term Long Term Expiry Date ABC Holdings A3 BBB- 06/2006 Barclays A1+ AA- 06/2006 CABS A1+ A+ 05/2006 CBZ A1 A 06/2006 DCZ A3 BBB- 06/2006 FBC Bank A2 BBB+ 06/2006 FBCBS A3 BBB- 11/2006 Finhold A2 A- 02/2006 Genesis A3 BB+ 06/2006 Highveld A3 BB+ 06/2006 Interfin A3 BB+ 06/2006 Kingdom A2 BBB+ 07/2006 MBCA A1 A 06/2006 Metropolitan - BB 06/2006 NMB Bank A3 BBB- 06/2006 Premier A3 BB+ 06/2006 Renaissance A3 BB+ 06/2006 Sagit - BB 06/2006 Stanbic A1+ AA- 06/2006 Standard Chartered A1+ AA- 06/2006 Tetrad A3 BBB- 06/2006 Trustfin - BB- 06/2006 ZDB - BB- 07/2006
62 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005
APPENDIX 5 REGISTERED AND OPERATING BANKING INSTITUTIONS AS AT 31 DECEMBER 2005
COMMERCIAL BANKS Total Assets: ZW$ billions Banking Institution Address and Website 2004 2005 % Annual Growth
Agribank 15th Floor, Hurudza House, 737.64 3,423.88 364.17% 14-16 Nelson Mandela Avenue , Harare Tel: 774429 or 773704/5 or 774554 Fax 774554 http://www.agribank.co.zw
Barclays Bank of Zimbabwe 1st Street/Jason Moyo Avenue, Harare 2,991.71 15,942.91 432.90% Phone: 758280/99 or 758324 http://www.africa.barclays.com
CBZ Bank* 60 Kwame Nkrumah Avenue, Harare 2,556.53 14,344.08 461.08% Phone: 749714 or 748050/79, 759110-6 Fax 758077 http://www.cbz.co.zw
FBC Bank** Old Reserve Bank Building 442.61 2,291.59 417.74% 76 Samora Machel Avenue, Harare Phone: 700312/703529 Fax 704995 http://www.firstbank.co.zw
Kingdom Bank Limited 12th Fl, Karigamombe Centre 646.09 1,785.93 176.42% 53 Samora Machel Avenue, Harare Phone: 749400, 758469/70/71, 749407, 091 235315 Fax 755201 http://www.kingdom.co.zw
MBCA Bank Limited Old Mutual Centre 612.07 7,526.18 1129.62% 3rd Street/Jason Moyo, Harare Tel: 701636/52 Fax 727330 www.mbca.co.zw
* Formerly Commercial Bank of Zimbabwe ** Formerly First Banking Corporation
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 63 APPENDIX 5 REGISTERED AND OPERATING BANKING INSTITUTIONS AS AT 31 DECEMBER 2005 CONTINUED
COMMERCIAL BANKS Total Assets: ZW$ billions Banking Institution Address and Website 2004 2005 % Annual Growth Metropolitan Bank of Metropolitan House 230.39 826.01 274.15% Zimbabwe Limited 3 Central Avenue, Harare Phone: 706091/706128 (701970-Direct) Fax 733014 http://www.metbank.co.zw
NMB Bank Limited 1st Floor, Unity Court 1,137.94 3,552.35 212.17% Kwame Nkrumah Avenue, Harare 759651/9/54933/5/70912268/70912409 http://www.nmbz.co.zw
Stanbic Bank Zimbabwe Limited Stanbic Centre 1,788.33 10,897.95 509.39% Samora Machel Avenue, Harare Phone: 759471 Fax 772126 http:// www.stanbic.co.zw
Standard Chartered Bank Zimbabwe 2nd Floor, Old Mutual Centre 4,055.62 15,969.63 293.77% Limited Cnr. Third Street/Jason Moyo Avenue Harare Phone: 253801-7, 252289 Fax 252288 http://www.stanchart.co.zw
ZB Bank Limited* Zimbank House 1,652.48 8,066.74 388.16% Cnr.1st Street/Speke Avenue, Harare Phone: 751168/75 or 78662590/2576 http:// www.finhold.co.zw
Zimbabwe Allied Banking Group 13th Floor, SSC n/a 1,673.60 n/a S. Nujoma / J. Nyerere Way, Harare Tel: +263-4-794459 / 737261-4 www.zabg.co.zw
* Formerly Zimbank
64 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 5 REGISTERED AND OPERATING BANKING INSTITUTIONS AS AT 31 DECEMBER 2005 CONTINUED
MERCHANT BANKS Total Assets: ZW$ billions Banking Institution Address and Website 2004 2005 % Annual Growth African Banking Corporation Limited 1 Endevour Crescent 464.12 2,043.35 340.26% Mt. Pleasant Business Park, Harare Phone: 727294/9 or 703071 Fax 338102 369260-99 http://www.africanbankingcorp.com
Genesis Investment Bank Limited 10th Floor, CABS Centre 227.29 1,066.90 369.40% Jason Moyo Avenue Harare Phone: 703791/6 or 703551/3 Fax 705491 http://.www.genesis-zim.com
Interfin Merchant Bank 3rd Floor, Social Security Centre 478.63 1,358.14 183.76% Cnr. J. Nyerere Way/S. Nujoma St Harare Fax: 799492 / 252155 Phone: 790824, 790901, 790791 http://www.interfin.co.zw
Renaissance Merchant Bank 7th Floor, Karigamombe Centre 321.99 2,030.28 530.54% 53 Samora Machel Avenue Harare Phone: 773458/774686 Fax 798910 http://www.renaissance.co.zw
Premier Banking Corporation Borrowdale Office 44.30 1,705.65 3750.23% Sam Levy’s Office Park, Block A, Piers Road, Borrowdale, Harare Tel: 851642-49 Fax: 851630-31 http://www.premierfinancegrp.co.zw
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 65 APPENDIX 5 REGISTERED AND OPERATING BANKING INSTITUTIONS AS AT 31 DECEMBER 2005 CONTINUED
BUILDING SOCIETIES Total Assets: ZW$ billions Banking Institution Address and Website 2004 2005 % Annual Growth Beverley Building Society Beverley Place, Selous Avenue, Harare 298.83 1,647.20 451.22% Phone: 792631/5 / 705001 Fax 705999 http://www.bbs.co.zw
Central African Building Society Northridge Park, Northend Close, 479.62 5,108.79 965.18% Borrowdale, Harare Phone: 883823/59 Fax 883804 http://www.cabsonline.co.zw
FBC Building Society* ZBS House 28.58 504.27 1664.60% 113 Leopold Takawira Street, Harare Phone: 756811/6 or 772721/24/30/48 Web page not available
Intermarket Building Society 1st Floor, Travel Centre, South Wing 141.08 519.43 268.17% 95 Jason Moyo Avenue, Harare Phone: 702571 or 705833/705837 http://www.intermarket.co.zw
* Formerly Zimbabwe Building Society
66 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 5 REGISTERED AND OPERATING BANKING INSTITUTIONS AS AT 31 DECEMBER 2005 CONTINUED
FINANCE HOUSES Total Assets: ZW$ billions Banking Institution Address and Website 2004 2005 % Annual Growth ABC Asset Finance (Ltd) Mount Pleasant Business Park 177.82 1,038.27 484.24% Golden Stairs Road, Mount Pleasant Harare Phone: 369260/89 http://www.africanbankingcorp.com
Trustfin (Pvt) Limited First Floor, Building 1 33.12 244.20 637.33% Arundel Office Park, Mount Pleasant Harare Tel: +263-4-338235-52 Fax: +263-04-338256 http://www.trustfin.co.zw
Sagit Finance House Limited 14th Floor, Intermarket Life Towers 24.05 117.78 389.73% 77 Jason Moyo Avenue Harare Phone: 794053/794486, 794486, 774294 / 790616/794986 Fax:792017 / 792570 http://www.sagit.co.zw
ZDB Financial Services Limited ZDB House 40.90 191.67 368.63% 99 Rotten Row, Harare Phone: 774226/7, 750171/8, 751341 Fax: 720724/774225 http://www.zdb.co.zw
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 67 APPENDIX 5 REGISTERED AND OPERATING BANKING INSTITUTIONS AS AT 31 DECEMBER 2005 CONTINUED
DISCOUNT HOUSES Total Assets: ZW$ billions Banking Institution Address and Website 2004 2005 % Annual Growth ABC Securities (Ltd) 1 Endeavour Park 64.55 546.11 746.22% Mount Pleasant Business Park Golden Stairs Road, Mount Pleasant Harare Phone:369260/89 http://www.africanbankingcorp.com
Discount Company of 70 Park Lane 54.09 269.23 397.74% Zimbabwe Limited Harare Phone: 708945/6 or 705414 Fax 731670 http://www.kingdom.co.zw
Highveld Financial Services 12th Floor, Pearl House 26.18 274.17 974.16% 61 Samora Machel Avenue, Harare Phone:700462/3, 700471, 700533 / 851642 Fax 700565 Fax:700565 Web page not available
National Discount House Limited 5th Floor, MIPF House 48.64 1.16 -97.61% 5 Central Avenue, Harare Phone: 700771/5 or 705596/8 Fax 705749 / 251402 http:// www.ndh.co.zw
Tetrad Securities Limited 9th Floor, Pegasus House 32.28 148.28 345.60% Samora Machel Avenue, Harare Phone: 704271/5 / 302625 Fax 704149 http://www.tetrad.co.zw
68 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 6 BANKING INSTITUTIONS UNDER CURATORSHIP
Banking Institution Curator Date of order Barbican Bank Mr. Matavire of KPMG 15 March 2004 Royal Bank Mr. Moyo of KPMG 4 August 2004 CFX Bank Limited Mr. Fungai Kuipa of Ernest And Young 17 December 2004 Trust Bank Corporation Mr.P. Bailey of KPMG 23 September 2004 Time Bank of Zimbabwe Limited Mr.T Rwodzi of Price Waterhouse 27 October 2004 Rapid Discount House Mr. Mubaiwa of Ernest And Young 13 March 2004 First National Building Society Mr. Scott of Ernest And Young 7 February 2003
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 69 APPENDIX 7 REGISTERED AND OPERATING ASSET MANAGEMENT COMPANIES AS AT 31 DECEMBER 2005
No. Institution Total Assets
1. ABC Asset Management Company $ 27.48 billion 1 Endevour Crescent Mount Pleasant Office Park Mount Pleasant Harare
2. Alpha Asset Management $ 5.96 billion 17th Floor, Intermarket Life Towers 77 Jason Moyo Avenue Harare
3. CBZ Asset Management $211.09 billion 1st Floor, Cecil House 2 Central Avenue Harare
4. Equivest Asset Managers $ 19.14 billion 18 Rowland Square Milton Park Harare
5. Fidelity Life Asset Management $ 15.59 billion 6th Floor, Northwing 101 Kwame Nkurumah Avenue Harare
6. Imara Asset Management $ 57.05 billion Block 4 Tendeseka Office Park Samora Machel Avenue Harare
7. Infinity Asset Management $ 17.43 billion 7th Floor, Red bridge South Eastgate Harare
8. Kingdom Asset Management $ 22.51 billion 71 Selous Avenue Harare
9. Legend Asset Management $ 6.11 billion 95 Park Lane, 2nd Floor Kenyan High Commission Building Harare
70 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 7 REGISTERED AND OPERATING ASSET MANAGEMENT COMPANIES AS AT 31 DECEMBER 2005 CONTINUED
No. Institution Total Assets
10. MBCA Capital Management $ 8.27 billion Shop 1, Stanley House 1st Street & Jason Moyo Avenue Harare
11. Old Mutual Asset Managers $ 41.40 billion 100 The Chase West Emerald Hill Harare
12. Premier Asset Management $ 24.72 billion Block A, Sam Levy Office Park Piers Road, Borrowdale Harare
13. Purpose Asset Management $ 43.31 billion Number 7, Philips Avenue Belgravia Harare
14. Syfrets Asset Management $ 94.53 billion 4th Floor, Batanai Gardens 1st Street & Jason Moyo Avenue Harare
15. TFS Asset Management $ 22.43 billion 9th Floor, Pegasus House Samora Machel Avenue Harare
16. TN Asset Management $ 3.48 billion 5th Floor, Suite A & B 101 Kwame Nkurumah Avenue Harare
17. Zimnat Asset Management $ 17.02 billion 1st Floor, ZImnat House Nelson Mandela Avenue Harare
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 71 APPENDIX 8 ASSET MANAGEMENT COMPANIES CLOSED IN 2005
No. Institution Reason Date Closed
1. Sagit Asset Management (Pvt) Ltd Lending and taking position 15-08-05
2. Guardian Asset Management (Pvt) Ltd Lending 21-06-05
3. ReNaissance Asset Managers (Pvt) Ltd Funding non performing book with
investors' funds 01-06-05
4. Imperial Asset Management (Pvt) Ltd Misappropriation of investors' funds 01-06-05
5. CFX Asset Management (Pvt) Ltd Insolvency (funds locked up in CFX Bank
under curatorship) 03-08-05
6. Integrity Asset Managers (Pvt) Ltd Misappropriation of investors' funds 15-08-05
7. VFS Asset Management (Pvt) Ltd Misappropriation of clients' funds 16-12-05
8. GP2 Asset Management (Pvt) Ltd Lending 18-03-05
9. Sunshine Unit Trust Management
Company (Pvt) Ltd Misappropriation of investors' funds 08-03-05
10. Mercantile Asset Mgt Taking position with clients' funds 21-04-05
11. First Factoring Company of Zimbabwe Viability challenges and misappropriation
Asset Management (Pvt) Ltd of investors' funds 23-03-05
12. Leading Asset Managers (Pvt) Ltd Taking position with clients' funds 15-08-05
72 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 APPENDIX 9 BANK LICENSING SUPERVISION AND SURVEILLANCE DIVISIONAL STRUCTURE
Senior Division Chief
Principal Legal Personal Advisor Assistant
Secretary
Chief Bank Examiner: Principal Bank Examiner: Principal Bank Examiner: Supervision of Banks & Market Supervision of Non-Banking Bank Licensing, Policy Research Stabilisation Financial Institutions Compliance & Risk Management
Personal Secretary Secretary Assistant
Senior Bank Senior Bank Senior Bank Senior Bank Senior Bank Senior Bank Senior Bank Senior Bank Senior Bank Examiner Examiner Examiner Examiner Examiner Examiner Examiner Examiner Examiner Large Medium & Pre-emptive Microfinance Non Banks Asset Licensing Compliance & Risk Banking Small Strategies & Money Fls Management Policy Research Corporate Management Institutions Banks Lenders Companies & MIS Governance
Bank Bank Bank Bank Bank Bank Bank Bank Bank Examiners Examiners Examiners Examiners Examiners Examiners Examiners Examiners Examiners
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 73
PROFILE OF BANK LICENSING, SUPERVISION & SURVEILLANCE (BLSS)
The Division comprises of three departments, namely: which include the microfinance institutions, a) Supervision of Banks & Market Stabilisation; moneylending institutions, People’s Own b) Supervision of Non-Bank Financial Savings Bank (POSB), Zimbabwe Development Institutions; and Bank (ZDB), Small Enterprises Development c) Bank Licensing, Policy Research, Compliance Corporation (SEDCO) and venture capital & Risk Management. companies. b) As in the case of banks and asset management 1.1 Supervision of Banks & Market Stabilisation companies, the ongoing supervision of non- a) This department is responsible for conducting banking financial institutions is conducted the following functions:- through on-site examinations and off-site • On-site examinations, both full-scope and analyses. targeted, to determine the financial condition of banking institutions and asset management 1.3 Bank Licensing, Policy Research, Compliance & companies. Risk Management • Off-site supervision which involves the analysis a) The department is responsible for the and evaluation of statutory returns submitted following:- to the Reserve Bank, both on a solo and • Licensing of banking and non-banking financial consolidated basis, utilizing predetermined institutions. performance indicators. The off-site • Evaluation of local mergers and acquisitions, supervision function acts as early warning restructuring proposals, and cross border system to identify emerging problems at banks investments by banks, including opening of and asset management companies. subsidiaries, branches, and representative offices. • Investigations on banking institutions and asset • Accreditation of rating agencies to complement management companies. Where peculiar prudential regulatory efforts in promoting problems are noted investigations are financial stability through enforcement of conducted in liaison with other divisions. market discipline, transparency and bridging • Consolidated Supervision, which involves the the information gap. evaluation of the strength of an entire banking • Drafting of regulations, guidelines and group, taking into account all the risks which amendments to statutes administered and may affect a bank, regardless of whether these applicable to the Reserve Bank. risks are carried in the books of the bank or • Developing prudential benchmarks for related entities. guidance of bank examiners and the financial b) Where problems are identified at the financial sector. institutions, BLSS recommends prompt • Provision of information, internally and enforcement of corrective action based on externally, on the status of the financial sector applicable laws and legislation. The corrective through reports and posting of the status action taken ranges from moral suasion to reports on the Reserve Bank website. curatorship and/or liquidation. • Facilitating discussions on policies and regulations with internal and external 1.2 Supervision of Non-Banking Financial Institutions. stakeholders. a) This department is responsible for the oversight of non-banking financial institutions,
74 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 NOTES
BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005 75 NOTES
76 BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2005