Eight banks to merge to meet liquidity threshold

05Mar 2021
Francis Kajubi
Dar es Salaam
The Guardian
Eight banks to merge to meet liquidity threshold

​​​​​​​AT LEAST eight banks are in the process of merging so as to meet liquidity and other laid down requirements, the financial sector regulator has affirmed.

Bank of Tanzania (BoT) Governor, Prof Florens Luoga, made this observation at an occasion to mark the merger of China Commercial Bank Ltd with NMB Bank Plc in Dar es Salaam yesterday, noting that mergers are a healthy move to give struggling lenders a new lease of life.

“Among the eight banks some of them have just filed the merger request. Others are at a good stage of the process while others are finalising the merger process,” he elaborated.

“I see mergers as a positive trend towards strengthening the banking sector because mergers attract more confidence among depositors and investors, hence attracting new ones. They enable the merging banks to expand their services to places they never reached,” he declared.

As of September 2020, there were 49 banks in the country, among which 38 are commercial banks, five are community banks, four are microfinance banks, and two are development banks. The banking sector recorded profit before tax of 590bn/- in 2019, from 313bn/- in 2018, not far from doubling the profit level, he stated.

As to the latest merger, Prof Luoga said that the regulator had conducted thorough research before opting to merge the two banks, to avoid negative impacts on either side of the merged banks.

In exercising its powers under section 56(1)(g)(i) and (iii) of the Banking and Financial Institutions Act, 2006, last November the Bank of Tanzania placed China Commercial Bank Ltd under its administration for 90 days in order to determine the best resolution to its regulatory challenges.

Normal business operations of the bank were suspended to pave the way for bringing new resolution options, the governor noted, underlining that the BoT exercised its mandate provided under Section 59 (4) of the Banking and Financial Institutions Act, 2006.

The process of determining resolution options of the bank has been completed, thus a transfer of assets and liabilities to NMB Bank Plc has been adopted as the formal resolution option with effect from yesterday, he declared.

Without revealing the value of assets and liabilities transferred, Prof Luoga said China Commercial Bank Ltd had big assets value compared to its liabilities.

“As mandated under Section 58(2) (h) of the Banking and Financial Institutions Act, 2006, BoT has under acquisition by operation of the law, transferred all assets and liabilities of China Commercial Bank Limited to NMB Bank Plc,” he specified, reiterating the regulator’s commitment to protect the interests of depositors, creditors and maintain the stability of the banking sector.

On her part, Ruth Zaipuna, Chief Executive Officer for NMB Bank Plc said that the decision of transferring assets and liabilities of China Commercial Bank is not meant to bankrupt the bank but to enable it operate and safeguard interests of depositors and creditors.

“I would like to assure depositors and creditors of the bank we have acquired that their monies are in safe custody. We have the capacity and ability of taking over this task and serve our new customers to the best of our standards,” she said.

It will take 60 days for customers of the then China Commercial Bank to start enjoying services at NMB Bank Plc branches. The time can be cut further depending on the ‘know your customers’ process, she elaborated.

The new customers from CCB will after the two months be served at two branches of NMB, namely Bank House and Ohio in the city centre but after the KYC process they will be served at any branch across the country.

“All borrowers of the then China bank are welcomed at NMB for talks on how to continue repaying their loans as per terms and conditions of the agreements,” the CEO added.