INTERNATIONAL banks are terminating working relations with their local counterparts, in a move that will affect the importation of cash and payments to foreign suppliers.
In his mid-term fiscal review of the half year Finance minister Patrick Chinamasa said last year there was an ongoing trend whereby international correspondent banks were terminating banking relations with financial institutions in the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG) member states including Zimbabwe.
“……this is a worrying trend as it undermines global payments systems thereby hindering free flow of international trade and financial transactions. It is a matter that ESAAMLG member states are going to take it up with a view to restoring international correspondent bank relationships,” he said.
Local banks have partnerships with international banks, which were used for foreign payments by customers wanting to buy products outside the country.
Sources said the move will result in banks, making direct cash payments to foreign banks, which means banks will lose income and there was a risk for customers when they move around with huge amounts of cash to foreign countries for payments.
“Banks will also have challenges in importing cash when the correspondent banks terminate relationship, with the local banks,” the source said.
The identities of banks affected could not be established yesterday. But the source said affected banks will not disclose their fate fearing losing business to competitors.
Early this year, Commerzbank terminated its contract with local banks. The German bank was correspondent institution for local banks such as NMB, which had to look for another correspondent bank.
The exit of Commerzbank came after Barclays Plc was fined $2,5 million by the US Treasury Department for processing transactions of individuals, companies and related parties on the US sanctions list. This came after Barclays had assisted the government-owned Industrial Development Corporation to process transactions in the period 2008 to 2013.
“Barclays processed 159 transactions totalling $3 375 617 to or through financial institutions located in the United States — including Barclays’ New York branch — for or on behalf of corporate customers of Barclays Bank of Zimbabwe Limited that were owned 50% or more, directly or indirectly, by a person identified on OFAC’s List of Specially Designated Nationals and Blocked Persons,” the US Department of Treasury said.
The country has a high import bill as most products were not procured locally due to the underperforming manufacturing sector.
Zimbabwe has been facing cash challenges since February this year due to low exports forcing the depletion of money in the nostro accounts.
The central bank attributed the cash crisis to low exports, the increased usage of the dollar due to the depreciation of the South African rand. The Reserve Bank of Zimbabwe has responded to the cash crisis through advocating the use of plastic money, drawing up an import priority list and is set to introduce bond notes next month under a $200 million export incentive facility guaranteed by the African Export-Import Bank.