Walter Muchinguri Assistant Business Editor
The Reserve Bank of Zimbabwe yesterday cancelled AfrAsia Bank Zimbabwe Limited (formerly Kingdom Bank)âs licence after it failed to meet minimum capital requirements, becoming the second bank to fold since the beginning of the year.
Last month, Allied Bank had its licence terminated after bowing to undercapitalisation and attendant problems.
The cancellation of the AfrAsia licence follows board resolutions by AfrAsia Zimbabwe Holdings Limited and AfrAsia Bank Zimbabwe Limited to voluntarily surrender the banking licence.
AfrAsia, which was pursuing various initiatives to raise money, including courting potential investors and engaging Imara Capital Finance to jointly market a Medium Term Secured Note that was expected to generate an incremental $15 million, had core capital levels of $6 million by December 31 last year against the prescribed minimum capital requirement of $25 million
For the past few months, depositors have been failing to access their funds, with the bank giving maximum withdrawal limits of $20 in some instances.
The RBZ said in a statement the cancellation was in terms of section 14 (4) of the Banking Act [Chapter 24:20].
âThe Registrar has determined that the banking institution is no longer in a safe and sound condition in that the institution is grossly undercapitalised and is facing chronic liquidity challenges,â the apex bank said.
âAll efforts by the shareholders to recapitalise the institution in order to comply with the minimum capital requirements have failed.
âIn addition, the board of directors advised that AfrAsia Bank Limited was constrained in availing any RBZ cancels AfrAsia Bankâs licence
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further support to the Zimbabwe operations.
âIn view thereof, the Registrar has determined that cancellation of the licence is in the best interests of the institutionâs depositors, creditors and members.â
The Reserve Bank said it had since applied for the bankâs liquidation in terms of section 57 of the Banking Act.
âThe public is advised that the order for the provisional liquidation will in due course be published separately in the press,â the central bank said.
AfrAsia Bank becomes the second bank to surrender its licence this year, after Allied bank did the same last month.
Both banks were among the six banks that were not compliant with minimum capital requirements as at December 31.
The other four include Capital Bank Limited and Interfin Banking Corporation that were closed last year; Metbank and Tetrad Investment Bank, which is now under provisional judicial management.
The RBZ said negotiations were at an advanced stage for the acquisition of by a potential investor of Microking Finance (Private) Limited, a subsidiary of AfrAsia Bank.
The micro finance company would be closed to protect the groupâs assets.
AfrAsia Bank Zimbabwe was founded as Kingdom Financial Holdings by Mr Nigel Chanakira in the 1994.
Mr Chanakira exited the struggling institution after its takeover by Mauritius-based AfrAsia banking group in a development that was expected to help revive its fortunes.
AfrAsia took up a 35 percent interest in the then Kingdom Financial Holdings for about $9,5 million in 2012 as the local bank struggled to meet new capitalisation requirements.
The closure of struggling banks is in line with RBZ Governor Dr John Mangudyaâs monetary policy statement delivered last month that the Reserve Bankâs objective was to ensure that the financial sector is free from distressed banks by June 30.