An International Monetary Fund (IMF) technical assistance team has noted that adopting Basel III global liquidity standards in Zimbabwe is now a high priority, according to a World Bank report, raising concerns about local banks' stability.
In July 2023, actuarial science data showed most banks failed to remain adequately capitalised and were on shaky ground, despite holding billions of depositor funds based on Basel III standards.
This was based on the Basel III capital accord, which requires banks to calculate their economic capital using internal models like the Z-Score to meet Basel's financial stability standards.
Basel III's standards are international banking regulations developed by the Basel Committee on Banking Supervision (BCBS) in response to the 2008 recession.
The BCBS aims to promote global monetary and financial stability.
“The 2024 IMF technical assistance (TA) report details Zimbabwe's efforts to implement the Basel III liquidity framework, focusing on the net stable funding ratio (NSFR) and liquidity coverage ratio (LCR),” the World Bank's Africa chief economist's office revealed in its latest report.
“The report highlights Zimbabwe's banking sector challenges, including liquidity risk and non-performing loans, and offers recommendations to strengthen risk-based supervision. The Reserve Bank of Zimbabwe (RBZ) is working to finalise NSFR regulations and enhance data transparency.”
The IMF TA report follows up on the 2019 financial sector stability review (FSSR). A hybrid technical assistance mission supported the RBZ in implementing the Basel III liquidity framework, focusing on the NSFR.
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The NSFR ensures banks maintain a stable funding structure over a one-year timeframe.
The IMF TA mission reviewed RBZ drafts, supported the RBZ in elaborating a questionnaire, and delivered training on LCR and NSFR.
“As recommended by the FSSR and previous TA missions, finalising Basel III liquidity standards in Zimbabwe is a high priority. LCR regulations were issued in December 2022 and implemented by banks since then.”
The TA mission team worked with RBZ staff to strengthen NSFR regulation drafts and data reporting templates.
At the RBZ's request, IMF's monetary and capital markets department conducted a hybrid mission from March 25 to 28, 2024, and visited Harare from April 8 to 12, 2024.
