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Zimbabwe Cancels Bank Licences

Lawrence Ndlovu - 5/18/2007

HARARE- The Reserve Bank of Zimbabwe (RBZ) yesterday cancelled a commercial bank's licence to handle foreign currency transactions citing the insitution's failure to adhere to sound risk management practices. RBZ governor Gideon Gono said NMB Bank Limited 'will no longer be permitted to enter into and effect any new foreign currency transactions from 15 May 2007.

'The cancellation of NMB Bank Limited’s Authorised Dealership status is a result of NMB Bank Limited’s breach of Exchange Control Regulations amid failure by the institution to adhere to sound risk management practices which saw the illegal externalization of foreign currency by the bank amounting to US$4 794 694.60,' Gono said.

The bank was allegedly swindled of the money by a former employee, Shame Mandara, who was an assistant manager in the treasury department. Mandara has since fled the country.

Gono directed the bank to expedite the return of all externalised funds as well as cooperate with the Reserve Bank of Zimbabwe, Police, Anti-Money Laundering and other international institutions in tracking down the perpetrators of this fraud and establishing the beneficiaries of Cardinal Finance Co among a host of other directives.

The bank was also ordered to reorganise both its management and board team within 4-5 months in order to strengthen and improve its risk management capabilities as well as bank oversight responsibilities.

'To this end, NMB Bank have been directed to appoint, within the next 120-150 days, fit and proper persons to take charge of Treasury, Finance and Risk Management functions in the bank in consultation with the Reserve Bank of Zimbabwe,' Gono said.

Gono said that NMB Bank Limited’s all other local currency (ZWD) banking operations were not affected this cancellation.

NMB is not new to controversy. In 2004, the bank became the first commercial bank to have its authorised dealership revoked for allegedly engaging in non-core banking activities.

Its former directors- James Mushore, Julius Makoni, Otto Chekeche and Francis Zimuto.

Some of the directors have since been cleared of the allegations.

The developments at NMB is a setback to the banking sector after surviving the 2004 banking storm that claimed the scalp of six banks.