NANCY MWAPE, Lusaka
SOME foreign banks are still struggling with capitalisation despite converting into local banks to meet the revised minimum capital requirement from K12 billion to K104 billion in 2012, the Bank of Zambia (BoZ) says.
Five years ago, BoZ revised capital requirements for commercial banks, which also entailed classifying them into locally-owned and foreign-owned banks.
The minimum capital requirement for locally and foreign-owned banks was pegged at K104 billion and K520 billion respectively.
Then Minister of Finance Alexander Chikwanda said the measure will help mobilise additional resources to enable banks to participate effectively in national economic growth and provide more money for credit.
Mr Chikwanda said the increase will also make the banks more resilient to economic shocks.
Nevertheless, BoZ deputy governor for operations Bwalya Ng’andu said the development has not produced expected outcomes.
“A number of foreign banks converted with the idea that Zambians will subscribe to the equity ownership of up to 51 percent. We have not been successful in this endeavour because for some reasons we cannot find Zambians with the money to subscribe to the equity.
“These banks are operating as Zambians but in terms of management, they are foreign banks, meaning [that] their capital formation is not in harmony with what we want,” he said.
Commenting on the performance of the banking system, Dr Ng’andu, who is registrar of banks, said the general condition of the sector is satisfactory in terms of capital, liquidity, profitability and to some extent the quality of assets.
He, however, expressed concern with the increase in the number of non-performing loans, which are a potential source of instability for the banking system.
“One of the problems that have been indicated [are that of] non-performing loans. We have a limit of 10 percent potential limit exposure but this has been exceeded, meaning that a number of banks have non-performing loans way in excess of 10 percent,” he said.
Dr Ng’andu said the central bank is engaging commercial banks to work on reducing the non-performing loans.
And commenting on new entrants, Dr Ng’andu said two years ago, BoZ approved one application for setting up of a bank but that has not materialised.
“We have had a few inquiries from a number of interested parties to come [on board]. We are still waiting for them to submit formal applications,” he said.