Banking industry experienced major shake-ups in 2018

27Dec 2018
Francis Kajubi
Dar es Salaam
The Guardian
Banking industry experienced major shake-ups in 2018

As 2018 comes to an end, the banking industry experienced some of the worst shake-ups involving top hierarchy of managements in addition to liquidity challenges while non-performing loans decreased slightly.

Bank of Tanzania Deputy Governor, Dr Bernard Kibese.

Shock gripped the industry when longest serving CRDB Bank Plc Managing Director, Dr Charles Kimei who was expected to retire in May 2019, left abruptly in October. No reason was given by CRDB Bank’s board for Dr Kimei’s early departure at takeover by Abdulmajid Nsekela.

Last month, another banking industry heavyweight, NMB’s Ineke Bussemaker, announced her departures. “Bussemaker will be leaving at the end of the year after expiry of her NB contract,” the bank said in a brief statement.

Two top most senior executives of the country’s largest banks in every aspect, have left in 2018 which leaves behind new blood to run these monster banks which between them control over 40 percent of the sector.   

Away from the two icons’ departure from the banking industry, financial sector stakeholders said altogether, 2018 was a relatively turbulent year with new laws and regulations introduced by Bank of Tanzania.

Some community, commercial and other financial institutions were placed under BoT supervision at different times almost under similar circumstances.

In January 2018, the central bank closed down five microfinance institutions by withdrawing their operating licences after their capital fell below the legal minimum. BoT also ordered three state owned commercial banks namely Tanzania Postal Bank Plc, Twiga Bancorp and Tanzania Women Bank to merge so improve their finances and enable them make profit.

The TPB was given a overall responsibility to manage the two other banks whose books were tainted with losses and declining capital base.

Banks which the central bank closed in January included Covenant Bank, Efatha Bank, Njombe Community Bank, Kagera Farmers’ Corporative Bank and Meru Community Bank because of inadequate operating capital.

“These banks are all undercapitalized. They are in breach of the requirements of the Banking and Financial Institutions Act 2006,” said Dr Bernard Kibesse Deputy Governor, Financial Stability and Deepening (FSD ) when he announcing the measures.

Bank M was next to be placed under BoT mid this year because of similar reasons as Twiga and Tanzania Women’s Bank. The bank had operated for 11 years as a profit making company before distress struck in the past three years thanks to growing portfolio of NPLs.

In a bid to improve liquidity in the sector, the BoT cut discount rate for lending to commercial banks from 9 to 7 percent saying the move was aimed at promoting credit growth to foster economic activities.

The revised discount rate also took into account the prevailing monetary policy stance and development in the 91 day and 182 days treasury bill yields. The central bank’s policy decision came after it had lowered yields for government debt instruments to below seven per cent from fourteen percent two years ago.

In another development to restore discipline in Interbank Foreign Exchange Market (IFEM), BoT suspended five banks for violating regulations.

“IFEM members who contravene the code are usually suspended to participate in the IFEM for a specified period of time. The suspension serves only in the IFEM. Therefore, suspended banks, namely, Barclays, Exim Bank, UBA Bank, BancABC and Azania, are allowed to participate in other markets like retail market,” said the central bank in a statement.

During the year, non-performing loans generally fell to 11.5 percent as from a high of over 20 percent in 2016.

“Majority of commercial banks are charging interest rates on loans that go above 16 per cent while interest rate paid on deposits are not more than four per cent. Lenders are striving to maximize their profits while reducing costs in terms of money paid to depositors which may discourage people from saving,” said Senior Lecturer in Economics at Mwalimu Nyerere Memorial Academy, Dr Lenny Kasoga.

 

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