bank licensing, supervision and surveilLance report 2006 report and surveilLance supervision bank licensing, bank licensing, supervision & surveilLance 2006 Annual Report DS MARKETING PO BOX EH149 EMERALD HILL, HARARE, PHONE 011 606 171 DS MARKETING PO BOX EH149 EMERALD HILL, HARARE, PHONE 011 Copies of the Annual Report are available from: Senior Division Chief Reserve Bank of Zimbabwe Bank Licensing, Supervision & Surveillance Division 80 Samora Machel Avenue Harare Zimbabwe Fax: +263-4-705928 Tel: +263-4-703000 Also available on the Reserve Bank website (www.rbz.co.zw) BANK LICENSING, SUPERVISION & SURVEILLANCE ANNUAL REPORT 2006 CONTENTS PURPOSE OF THIS REPORT ....................................................................................................................................................................................................................................................2 GOVERNOR’S FOREWORD ......................................................................................................................................................................................................................................................3 DEPUTY GOVERNOR’S REMARKS............................................................................................................................................................................................................................................6 SENIOR DIVISION CHIEF’S PREVIEW ....................................................................................................................................................................................................................................8 CHAPTER 1: BLSS OPERATIONS AND ACTIVITIES ..............................................................................................................................................................................................................10 1.1 Overview....................................................................................................................................................................................................................................................................10 1.2 Licensing of Financial Institutions ..........................................................................................................................................................................................................................10 1.3 Off-site Surveillance..................................................................................................................................................................................................................................................11 1.4 On-site Examinations................................................................................................................................................................................................................................................11 1.5 Organisation of the Division....................................................................................................................................................................................................................................11 1.6 Supervision of Banks & Market Stabilisation Dept ................................................................................................................................................................................................12 1.7 Supervision of Non-bank Financial Institutions Dept............................................................................................................................................................................................13 1.8 Bank Licensing, Policy Research, Compliance & Risk Management Dept ..........................................................................................................................................................13 1.9 Legal Counsel............................................................................................................................................................................................................................................................14 CHAPTER 2: DOMESTIC MACROECONOMIC DEVELOPMENTS ........................................................................................................................................................................................15 2.1 Overview....................................................................................................................................................................................................................................................................15 2.2 Gross Domestic Product ..........................................................................................................................................................................................................................................15 2.3 Inflation ....................................................................................................................................................................................................................................................................16 2.4 Fiscal Developments ................................................................................................................................................................................................................................................17 2.5 Exchange Rate Developments ................................................................................................................................................................................................................................17 2.6 Balance of Payments Developments ......................................................................................................................................................................................................................17 2.7 Stock Market ............................................................................................................................................................................................................................................................17 CHAPTER 3: CONDITION & PERFORMANCE OF THE BANKING SECTOR ......................................................................................................................................................................18 3.1 Overview....................................................................................................................................................................................................................................................................18 3.2 Consolidated Balance Sheet Structure....................................................................................................................................................................................................................18 3.3 Performance of the Banking Sector ........................................................................................................................................................................................................................21 3.4 Sectoral Analysis........................................................................................................................................................................................................................................................23 3.5 Asset Management Companies Sector....................................................................................................................................................................................................................30 CHAPTER 4: MAJOR DEVELOPMENTS IN THE BANKING SECTOR....................................................................................................................................................................................32 4.1 Introduction..............................................................................................................................................................................................................................................................32 4.2 Banking Sector Consolidation ................................................................................................................................................................................................................................32 4.3 Major On-Site Examination Findings ......................................................................................................................................................................................................................32 4.4 Supervisory Responses ............................................................................................................................................................................................................................................36 4.5 Issuance of Prudential Guidelines ..........................................................................................................................................................................................................................37 CHAPTER 5: BASEL II IMPLEMENTATION ............................................................................................................................................................................................................................39