Posted on Monday, 19 October 2015 15:13

Zimbabwe: Investigation into bank closures begin

By Nqobile Bhebhe

Zimbabwe's Deposit Protection Corporation (DPC) has embarked on a forensic audit into two collapsed financial institutions, to ascertain whether fraud or corruption were reasons the financial institutions collapsed.

If the audit reveals any financial improprieties, then it will recommend the prosecution of shareholders or owners of the collapsed institutions – AfrAsia and Royal Bank.

AfrAsia Bank was closed in February this year while Royal shut shop in 2012.

DPC, with the mandate of creditors, has commissioned a forensic audit of AfrAsia Bank and Royal Bank

The DPC, formed in 2003, is an autonomous statutory body governed by the Deposit Protection Corporation Act (Chapter 24:29) to administer the Deposit Protection Fund and compensate depositors in the event of a bank failure.

Currently, DPC has seven struggling banks under its watch, as it is lobbying for a framework to act quickly on banks facing liquidation.

"DPC, with the mandate of creditors, has commissioned a forensic audit of AfrAsia Bank and Royal Bank. Creditors have also mandated DPC to follow up on parties who abused depositors' funds," a banking official said.

Six banks — Allied, Trust, AfrAsia, Capital, Interfin and Royal—have been closed since 2012.

Currently, the DPC has paid 41% of the insured amount at AfrAsia, Royal (75%), Trust (39%), Genesis (73%), Allied (33%) and Interfin (20%).

The deposit insurance cover is pegged at $500 and at this cover 88,5% or about 1,252,949 out of about 1,417,785 million depositors were covered in full.

Last month, DPC said it has so far paid out $2,6 million to depositors.

DPC chief executive, John Chikura recently said delays by the central bank in withdrawing licences of distressed banks allowed shareholders and management in the troubled institutions to strip assets, leaving very little for affected depositors.

He gave an example of Interfin, which went under curatorship in 2012 and had a gap of $98 million, but when it was liquidated last year this had surged to $158 million.

Several banks have closed down since independence 1980 for different reasons, including operating environment, insolvency and mismanagement.

Proposed new amendments to the Banking Act will see directors and senior executives of banking institutions facing legal action if they act recklessly or negligently, leading to the closure of their banks.

If their bank or company is placed under curatorship or wound up and its business has not been carried on prudently, "they will be liable for its debts unless they establish that they were not responsible".

The Registrar of Banks and DPC may take legal action against them on behalf of depositors and creditors, who suffer losses if directors and executives act recklessly, negligently or fraudulently.

Directors have to attend at least three-quarters of the board meetings convened.

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