The best of the rest
Although the economic situation in Zimbabwe is not at desperate as it was perhaps five years ago, there is little prospect of the economy and the country’s banks regaining their former status in the foreseeable future.
However, the Reserve Bank of Zimbabwe (RBZ) has instructed the country’s banks to adopt the Basel II regulations, used to regulate banking worldwide, by the end of March next year.
Adoption of Basel II is generally regarded as conveying a level of sound governance and management on a country’s banking sector. It is widely agreed that Zimbabwe needs a more effective and better managed banking industry, so the new regulations should be welcomed.
FirstRand’s net income for the financial year to the end of June reached R18.4bn ($1.3bn), up from R14.8bn ($1bn) for the previous year
The governor of the reserve bank, John Mangudya, announced: “The Reserve Bank will conduct a final survey on the implementation progress during the quarter ending 30th September 2014 before banks go live using the Basel II-compliant statutory returns beginning the first quarter of 2015. The Reserve Bank noted the need for banks to involve independent review units such as internal auditors as well as external auditors in the validation of the Basel II-related systems and processes.”
Botswanan banks must also adopt Basel II next year, but in addition will be required to adopt the more recent Basel III regulations.
First National Bank of Botswana is preparing for the transition and results issued in September suggest steady growth over the past year. The bank recorded a 3% rise in profits, 17% rise in loans, plus a 7% rise in non-loan revenue.
Yet at the same time as Botswanan banks are being forced to adopt stricter criteria, they are also facing increased competition from new entrants into the domestic market. There were just six banks in the country in 2005 but that figure has now risen to 13. FNBB, Barclays, Standard Chartered and Stanbic continue to dominate the sector but to a lesser extent.
This diversification is the result of a conscious strategy on the part of the government and the Bank of Botswana (BoB). A spokesperson for the BoB said: “Increased competition in the banking sector is desirable as it is expected to enhance institutional delivery efficiency, innovation and contribute to superior service delivery.”
Botswana’s banking supervision report for 2013, which was recently published, stated: “The most widely used measure of concentration is the Herfindahl-Hirschman Index (HHI). Evidence drawn from the results the analysis based on the HHI over a five year period shows a modest decline in the index, from 0.21 in 2009 to 0.18 in 2013.
This provides some evidence that competitiveness in the Botswana banking sector is gradually improving, as the ratio is at the theoretical threshold of 0.18 for moderate concentration.” In 2005 the HHI stood at 0.25.