|
|
ZIMBABWE: Court ruling may herald financial sector turmoil
[ This report does not necessarily reflect the views of the United Nations]
|
? ?Obinna Anyadike/IRIN
The amalgamated banking group is critical to financial sector stability, says economist
|
JOHANNESBURG, 14 Sep 2005 (IRIN) - A court ruling that the state-controlled Zimbabwe Allied Banking Group (ZABG), an amalgamation of three failed commercial banks, acquired its assets illegally could lead to chaos in the country's financial sector, an economist told IRIN.
Last year the Reserve Bank of Zimbabwe (RBZ) closed down the Trust, Royal and Barbican banks, and subsequently amalgamated them into the ZAGB under stewardship of the RBZ. The move was aimed at stabilising the financial sector after the collapse of several commercial banks as a result of mismanagement and the contracting economy.
This week lawyers acting for private shareholders of the failed commercial banks won a court ruling against the amalgamation, and analysts warned that the ZABG might collapse, sparking further chaos in the country's already fragile financial sector.
Economist Dennis Nikisi told IRIN that should the ZABG collapse, "it would be disastrous because government departments, parastatals and major corporates maintain accounts with the ZABG".
"Its closure would result in major problems in terms of working capital being locked in, etc ... it would have a ripple effect on the operational capacity of companies, parastatals and government departments banking with ZABG," he explained.
There had already been a "small run" on the bank, with private depositors withdrawing their cash because they feared that a collapse would wipe out their savings, but Nikisi commented that these were "small depositors".
Due to the importance of the ZABG, the government was likely to ensure the banking group's continued existence, "even if it means going back to parliament to promulgate a new law", he said.
Although the court ruled that the amalgamation of assets was not legal, it failed to make a determination on whether the assets of the failed commercial banks should be returned to their shareholders.
"With the ruling being vague, it clouds the issue - ZABG was not ordered to return the assets, which makes ZABG a going concern, so they remain amalgamated," Nikisi noted.
The ruling opened the way for further court petitions to have the assets of the failed commercial banks returned to their shareholders, he pointed out, but the overriding concern of the government would be that "ZABG needs to remain afloat in order to maintain financial sector stability".
Should another court ruling threaten the viability of the ZABG, "government can simply go back to parliament with new legislation to make sure that ZABG remains a legally operating entity", Nikisi said, citing a precedent set during the country's fast-track land reform programme.
"Government felt the courts were delaying the state's acquisition of agricultural land," Nikisi noted, "so they simply went to parliament and enacted legislation to legalise government's acquisition of farms."
[ENDS]
|
|
