Ralph Watungwa, the chief executive officer of Standard Chartered Bank of Zimbabwe Limited.
THE Reserve Bank of Zimbabwe (RBZ) and local banks are engaged in discussions to resolve a potential crisis over interest on foreign currency accounts (FCA) whose funds it took to fund critical needs at the height of the country’s economic crisis, the Financial Gazette’s Companies & Markets (C&M) can reveal.
The interest component, whose size could not immediately be established, is a direct result of companies’ deposits which were transferred to the central bank under exchange control directives to help fund operations of the cash-strapped government at the height of the hyperinflationary era.
Government, which has since assumed the central bank’s US$1,35 billion debt, has issued Treasury Bills (TBs) to local banks to settle the principal amount for companies’ funds seized to support what was then described as critical national obligations at a time when the economy was in deep crisis.
But banking sector sources told C&M that government, through the RBZ, is yet to settle interest on the FCAs, a situation which has put the financial institutions under pressure from affected companies who are now claiming the interest component.
“Undoubtedly, this has attracted a lot of discussions between banks, customers and authorities,” said Ralph Watungwa, the chief executive officer of Standard Chartered Bank of Zimbabwe Limited.
“The economy is going through quite a difficult period and we are at a situation where it may never be a win-win situation. But I think people should look at it in the context of what we are going through and establish what it is they can do for us to get out of this predicament.
“This (interest component) is something that has not been resolved yet. There is still a long discussion currently happening, engagement with the authorities and the customers. Hopefully, there will be a solution.
“However, the positive (thing) that is there, in my view, is that all stakeholders are working towards resolution. It’s no longer the wait and see attitude when people used to talk about FCA balances. Now we have taken steps.
“Are we 100 percent there? I don’t think so. Are we 80 percent there? I think so because we have resolved the issue of capital amounts. Now we are talking about resolving the interest bit, which is the fraction of the capital liability.
“I will give it a few months for people to digest and come up with a final position. This is a difficult position and there is always need for people to understand what it is they will give into the process. Of course, customers would want interest, and the bank would want interest. Maybe, through the discussions, everyone will come out happy.”
Several banks’ financial results for the six months to June 30 this year showed that interest on affected FCAs was reported as either RBZ-linked client interest balances or balances with the central bank or just reported under other liabilities.
Payment for the principal amounts in the form of TBs were meant to forestall legal claims by affected companies against the banks after some of them took their banks to court to recover their money, arguing that their banks had been irresponsible by capitulating to the RBZ’s demands to take cash from their customers’ accounts.
There was a landmark ruling by the Supreme Court ordering Standard Chartered Bank Zimbabwe to reimburse US$45 000 seized from a Chinese-owned firm, China Shougang International’s account by the State.
This case was used by other companies as a precedent.
Justice Vernanda Ziyambi in her ruling said Standard Chartered Bank had transferred the depositors’ funds at its own risk.
A High Court ruling also ordered the central bank to pay Trojan Mine US$1 million it took from its account held by BancABC in 2009.
The RBZ, however, filed an appeal with the Supreme Court, arguing that it was immune for prosecution under the General Laws Amendment Act. This then meant it was exposing the banks.
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