The Reserve Bank of Zimbabwe has extended the period of curatorship for Interfin Bank Limited, as well as the appointment of its curator (Peter Bailey of KPMG Zimbabwe), by an additional 18-months to 31 December, 2014 (the initial resolution deadline was set for 9 June, 2013). This is the longest period that a financial institution has remained under curatorship in Zimbabwe. The bank was placed under curatorship in June 2012, after concerns around its financial viability and allegations of mismanagement were unearthed.
The curator, in its preliminary report, cited four critical events that led to the bank’s closure:
The first was that, having failed to capitalise the bank, the directors and shareholders forced it to borrow expensively from the market and on-lend these funds to parent company, Interfin Financial Services Limited (“the group”). In turn, the group used the borrowed funds to capitalise its subisdiary bank (thus keeping the financial risk in the hands of the latter).
Secondly, the bank was exposed as its assets were used to back speculative trading and investing activities, with the failure of these causing the bank significant financial loss.
The curator further found evidence of corporate abuse and the misappropriation of third party funds. These funds should have been segregated from the bank’s own resources.
Lastly, the bank, due to acute under-capitalisation, was unable to self-fund loan requests from related parties as required by law. Instead, it resorted to using depositors’ funds, resulting in a significant capital deficit, and ultimately causing the collapse of the bank.
Several strategies are being explored by management, ranging from fresh equity investors to a deposit-to-equity swap deal and staff retrenchments. The viability of these initiatives and that of the bank’s future, however, remains uncertain.
GCR had accorded Interfin Bank Limited a non-investment grade, long-term, national scale rating of BB+(ZE) at the finalisation of its last review in December 2011. The bank’s rating expired in May 2012 and was subsequently withdrawn.
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