New banking model to drive Time Bank
Time Bank of Zimbabwe Limited is set to re-open its doors to the public 18 years after the financial institution was unilaterally closed by the regulator in 2004 during the reign of the then Reserve Bank of Zimbabwe (RBZ) Governor Dr Gideon Gono.
RBZ okayed the re-opening of the bank this week.
In a notice this week, the RBZ said Time Bank had been authorised to conduct limited banking activities in terms of the Banking Act (Chapter 24:20) following a pre-opening inspection of the institution’s readiness to commence banking business.”
A pre-opening inspection is an exercise done by the regulator to ensure that everything is in order before it is allowed to operate. The inspection involves verifying the bank’s capital requirements and evaluating its executive and non-executive directors to ensure that they are fit to manage the financial institution.
“Having regard to the institution’s risk management structures and processes, level of capitalisation, corporate governance arrangements, its business plan and the Banking Act, Time Bank has been authorised to conduct limited banking activities and shall not be taking deposits from the public”.
Time Bank’s return to the market is eagerly awaited given it has been known for innovation and in this case, it has been authorised by the RBZ to operate a new and unique business model whereby the financial institution will not start by taking deposits, as is usually done by commercial banks after voluntarily making the strategic decision on account of current market dynamics.
The bank will start by lending out to various categories of clients without taking deposits and review the model at an appropriate time.
“We appreciate RBZ’s authorisation for Time Bank to re-commence banking activities. The business model of lending without taking deposits is Time Bank’s initiative which was approved by RBZ as part of the pre-opening inspection.
“Such a business model was not imposed on us by RBZ. Time Bank will issue a public statement next week advising our date for starting such banking activities”, said the bank spokesperson yesterday.
This does not come as a surprise since the bank announced last year, before the pre-opening inspection, that under its business plan, it will begin by lending without taking deposits.
The bank said will be introducing four new loan facilities, namely mortgage loans, loan facilities for exporters, loans for the payment of compensation to both previous farm-owners (PFOs) and other groups of Zimbabweans who also deserve compensation.
Most of the new loan facilities “will be structured in an innovative way never seen before”.
However, Time Bank said it will now introduce the unique loan facilities after it was authorised to operate. Time Bank has said it would focus more on investment banking activities. Founded by Chris Takura Tande, Time Bank began operations in 1997 becoming the first locally owned indigenous commercial bank.
Other locally owned merchant banks and discount houses were to follow years later into commercial banking. Time Bank was closed in 2004 and its licence was cancelled in 2006 by the Central Bank. Time Bank disputed the reasons for its closure and cancellation of its licence, and was the first bank to take RBZ to the court.
The protracted legal battle unearthed that the bank was owed US$5 million by RBZ before its closure which created financial problems for the bank. The then RBZ governor Dr Leonard Tsumba agreed to refund the money to Time Bank but his term of office ended before the funds could be refunded.
His successor Dr Gono was accused of having reneged in refunding such money to the bank, which forced Time Bank to approach the courts. RBZ responded by putting the bank under a disputed curator in 2004 and cancelled the licence two years later.
After the cancellation of its licence, the RBZ tried to put Time Bank into ZABG, an amalgamation of failed banks, but Time Bank objected strongly, and given the intensity of legal fights, the RBZ left Time Bank out of ZABG.
“Also after the end of curatorship, Time Bank is probably the only bank in the banking history of Zimbabwe that in 2006 and 2007 paid all its depositors their full deposits and its staff members their full salaries and terminal benefits without borrowing from RBZ or without new money from its shareholders or Deposit Protection Corporation,” a senior bank official disclosed.
The courts reinstated the licence of Time Bank in 2009 but the bank could not operate, as RBZ could not do a handover of the assets, documents and affairs of Time Bank in the normal way at the end of curatorship, from the former curator to the bank’s directors.
In 2015, the new Governor of RBZ, Dr John Mangudya, resolved all the disputes between RBZ and Time Bank by entering into a Settlement Agreement, under which the RBZ agreed to refund to Time Bank the US$5 million it owed and also agreed on the issue of the outstanding handover/takeover as well as the re-opening of Time Bank, subject to pre-opening inspection.
This showed that the bank had enough financial resources before it was closed.-ebusinessweekly
