Mozambican business owners say banking sector situation generates climate of insecurity for companies

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Mozambican business owners say banking sector situation generates climate of insecurity for companies

4:22 CAT | 16 Nov 2016

File photo / Rogerio Manuel

The chairman of the Confederation of Mozambican Economic Associations (CTA) said yesterday in Maputo that the banking situation was generating a climate of insecurity for companies, warning of the risk of financial institution insolvency.

“This is very worrying and leaves us in a situation of total insecurity. This situation is generating a lot of instability in companies,” Rogério Manuel told journalists in relation to the Bank of Mozambique’s Friday announcement of the liquidation of O Nosso Banco.

Speaking at the end of a meeting with a delegation from the International Monetary Fund (IMF), Rogério Manuel said that there were other banks in the Mozambican financial system in a similar predicament.

“If we look at the index that caused O Nosso Banco to be declared bankrupt, we see others in the same situation. UBA [United Bank for Africa] is currently within 1 percent of O Nosso Banco’s level and may be the next to close, or another one,” the CTA chairman declared.

Manuel was worried that the companies that deposited money in O Nosso Banco had lost their resources, since the central bank was committed only to returning individual depositors’ money.

“The worst of it is that corporate clients will not be able to recover their money from these institutions, such as Nosso Banco,” he complained. The CTA had already requested a meeting with the governor of the Bank of Mozambique, he said.

Manuel criticized the central bank’s recent actions, suggesting that the regulator failed by implying that the Mozambican financial system was healthy, encouraging companies to rely on banks.

“At the moment, companies are being damaged because we have a regulator called the Bank of Mozambique, and these commercial banks, over ten years, have projected profits that, in a way, encouraged companies to make deposits in them but within a year [of the projections], went bankrupt,” he added.

Mozambique’s Central Bank headquarters in Maputo

On Friday, the central bank decided to liquidate O Nosso Banco, majority-owned by the National Social Security Institute, as presenting a “non-feasible situation”, and activated Deposit Guarantee Fund measures.

A statement sent to Lusa states that O Nosso Banco was unable to comply with the restructuring plan outlined in 2014, which entailed a recapitalisation and changes to the management structure

A second central bank communiqué concerning the activation of the Deposit Guarantee Fund for natural persons resident in Mozambique and holding accounts in meticais with a reimbursement limit of 20,000 meticais (EUR 240.00) followed.

O Nosso Banco was founded in 1999 as BMI-Banco Mercantil and Investimentos, and changed its name last year. Despite being a private entity, the majority of the capital was held by the National Institute of Social Security (77 percent), while other shareholders include public company Electricidade de Moçambique (15 percent) and SPI – Gestão de Investimentos, a company linked to top figures of the ruling Liberation Front of Mozambique (Frelimo) party.

This is the second financial institution that has been the target of central bank intervention since Rogério Zandamela was appointed head.

The Bank of Mozambique announced the suspension of Moza Banco’s board of directors and executive committee to “protect the interests of depositors” at the end of September but, unlike O Nosso Banco, the Moza Banco was not liquidated and is being prepared for sale.

Source: Lusa