Banks Advised To Engage Capital Markets
THE Bank of Zambia (BoZ) has advised commercial banks faced with challenges of meeting the increased minimum capital requirement, to go to the Lusaka Stock Exchange (LuSE) and other capital markets to raise the funds.
The Central Bank also revealed that some foreign banks were considering becoming Zambian so that they can meet the minimum capital requirement for local banks.
Foreign banks operating in the country would need a minimum capital requirement of US$100 million by the end of this year, while the local banks would need to have a figure 80 per cent less than the foreign banks at $20 million.
The previous requirement was $ 2.4 million with the Bankers Association of Zambia (BAZ) last week publicly complaining at the raised amount and the one year period suggesting that financial institutions should have been given up to five years as a complaint period.
Speaking at the bankers’ meeting at Taj-Pamodzi Hotel in Lusaka, BOZ Deputy Governor Bwalya Ng’andu said LuSE was one avenue that was offering banks a chance to raise the money they needed to meet the new minimum capital reserve.
“We want all banks to succeed in the country and we do not want anyone to collapse. We welcome various ways to raise the money and LuSE is one avenue they can go to and raise the money, we welcome all creative avenues.
“But we do know that the Lusaka Stock Exchange may be one challenge for the banks in their quest to rise money by the fact that they are small, but we are optimistic that no bank will fail,” Dr Ng’andu said.
He said BoZ was sure that six banks would easily meet the target for local banks.
He emphasised the central bank’s stand to raise the minimum capital saying, this would make the 19 banks operating in the country become relevant to the economy by being able to play a part in the economic development of the nation.
“We expect that you will now be relevant to the economy by lending to the mining and significantly to the agricultural sectors. With the new solvency, you can now do syndications and it makes you able to withstand major economic shocks,” he said.
He, however, pointed out that, although some banks may struggle to beat the year-end deadline, the financial sector authority would work closely with particular banks to find a solution to every bank’s challenge, depending on efforts made.
And Dr Ng’andu said some banks were considering becoming local banks so that they could meet the capital requirement.