Zimbabwe law caps bank shareholdings, allows foreigners to control local units

Zimbabwe plans to cap shareholdings in banks in a bid to improve stability following several bank failures in the last five years, but foreign banks would be allowed to control their local units, according to a bill before parliament. Five local banks have shut in the last two years due to liquidity and solvency problems and were viewed by some in the local sector as applying less stringent rules on lending compared with big foreign-owned banks.
The Banking Amendment Bill proposes to limit individual shareholdings in a bank at 5 percent and that of non-banking companies at 25 percent. Before passing those limits, a company or individual would have to justify to the Registrar of Banks it is in interest of the public and the bank. Foreign financial institutions such as Standard Chartered Plc and Barclays Plc, and South Africa's Standard Bank and Nedbank, which all have operations in Zimbabwe, would be allowed to control their local units.
Under the proposed law changes, individuals convicted of offences relating to money laundering or terrorist financing could not become directors of a bank's board. No individual would be allowed to continuously serve as non-executive directors of a bank for more than 10 years, while all directors will be liable for debts accrued by a failed bank, unless they can prove their innocence.
"If they act recklessly or negligently or fraudulently the Registrar and the Deposit Protection Corporation may take legal action against them on behalf of depositors and creditors who have suffered loss," the bill said. A state-owned asset management company had by the end of June taken on nearly $100 million in bad loans from banks to help restore viability in the financial sector.