According to the Banking Amendment Act 2015, which was gazetted last week, individuals implicated in the collapse of financial institutions in Zimbabwe can no longer assume directorship in any licensed banking institution in the country.
The legislation, meant to strengthen the financial services sector and restore public confidence battered by the collapse of nearly 30 banking institutions, including asset managers, since 2000, has also come up with heavy penalties for funding terrorism and money laundering.
The new law will also affect executives who ran non-banking institutions that directly controlled the collapsed banks; these have also been barred from sitting on the boards of banking institutions, unless they convince authorities that they were not responsible for the failure of banks under their watch.
The new law, which compels directors in banking institutions to declare their wealth on appointment, also now makes it a serious crime to hold shares in a bank where a close relative is a significant investor.
The Banking Amendment Act empowers bank chief executive officers (CEOs) to report all forms of abuse by shareholders to the registrar of banks at the Reserve Bank of Zimbabwe (RBZ), and gives the CEOs immunity from retribution.
The Act demonstrates government’s determination to bring sanity into the banking sector and is in line with recommendations by an International Monetary Fund for government to ensure financial sector stability in the country.
Banking institutions that have collapsed since 2004 include Trust Bank Corporation, Royal Bank, NDH Holdings, Interfin Banking Corporation, Barbican Bank, Genesis Bank, Capital Bank, Allied Bank, Century Holdings Limited, ReNaissance Financial Holdings, ENG Asset Management, Kingdom Financial Holdings Limited, CFX, Zimbabwe Allied Banking Group (ZABG), Intermarket Holdings Limited, First National Building Society (FNBS) and Tetrad Financial Holdings.
Intermarket Holdings and Kingdom Financial Holdings had commercial banking as well as building society operations. They also ran stock-broking arms, although these were not under the purview of the central bank.
These banks were mostly owned or operated by outstanding bankers, some of whom were considered astute dealmakers and led extravagant lifestyles using depositors’ money.
It would appear the new rules will also affect executives and board members at institutions such as the National Social Security Authority, which controlled Capital Bank before it closed two years ago.
Among prominent former CEOs who led failed banks were Samson Ruturi of FNBS; Jeffrey Mzwimbi of Royal Bank; Ntuli Ncube of Barbican; Patterson Timba of ReNaissance; William Nyemba of Trust Holdings; Eugene Mlambo of Tetrad; and Lynn Mukonoweshuro of Kingdom Financial Holdings, which had become AfrAsia Holdings after a Mauritian firm took over majority shareholding.
Financial officers in the affected banks have also been held liable for the collapse of the banks and will equally be affected by the new measures. financial gazette