Financial system remains healthy, says Bank of Mozambique

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Financial system remains healthy, says Bank of Mozambique

8:38 CAT | 18 Nov 2016

File photo / Bank of Mozambique

Despite the collapse a week ago of a tiny Maputo bank, “Nosso Banco” (“Our Bank”), there is no reason for citizens to panic about the overall health of the Mozambican banking system, the Board of Directors of the Bank of Mozambique declared on Friday.

At a Maputo press conference, board member Joana Matsombe said the banking system “is well capitalized and can meet the needs of its clients”. The average solvency ratio of the banks is 14 per cent, much higher than the central bank’s minimum requirement of eight per cent.

Matsombe said that the alarmist charts circulating on Facebook, purporting to show the imminent fall of other banks, were disinformation, and bore no relation to the real state of affairs.

She pointed out that Nosso Banco is a very small outfit, existing only in Maputo, and accounting for just one per cent of banking assets in the country and 1.33 per cent of total deposits. Its three branches, all in Maputo, had 5,116 individual depositors, and 987 businesses also held accounts there.

The central bank had revoked its licence to trade and ordered its liquidation because its financial situation had become unsustainable. Nosso Banco’s liquidity situation was so poor that it was running out of money to meet its obligations to its clients. It was also failed to meet the central bank’s monthly demand for obligatory reserves – the compulsory reserves coefficient (the amount of money that commercial banks must deposit with the Bank of Mozambique) currently stands at 15.5 per cent.

Matsombe said the central bank had demanded improvement, and the Nosso Banco shareholders had promised to recapitalize the bank. They should have injected more capital into the bank by 21 October, but failed to do so, and the Bank of Mozambique felt it had little option but to liquidate Nosso Banco.

A second board member, Alberto Bila, said Nosso Banco was quite different from Moza Banco, the bank in which the Bank of Mozambique had intervened in September, sacking its board and imposing a new board to prepare the bank for sale. Both banks had critically low solvency ratios, and needed recapitalization. But Moza Banco, with 48 branches throughout the country, had plenty of assets.

It also had a solid client base, with 93,000 individual depositors and 8,238 corporate depositors. There was no reason why Moza Banco could not become a going concern again, said Bila, and there were already potential buyers interests in purchasing it.

The shareholders still own Moza Banco, and if they could raise the money to recapitalize the bank, they would be allowed to do so.

Moza Banco has six per cent of deposits and 7.71 per cent of banking assets. So between them Nosso Banco and Moza Banco account for less than 10 per cent of the banking system’s assets or deposits. “We can’t say the banking system is in crisis just because of these two banks”, said Matsombe.

The Nosso Banco depositors will get at least some of their money back. As from next Monday, and over the following three weeks, individual depositors with accounts in the Mozambican currency, meticais, will be reimbursed up to 20,000 meticais (about 267 US dollars) each, though the government is thinking of increasing this ceiling.

That did not mean the rest of their money was irrevocably lost. The liquidator, the consultancy company Deloitte, will calculate the full assets of Nosso Banco, and the depositors, include companies, will have a claim on this bankruptcy estate, as will all other creditors. The first creditor to be paid off, Matsombe said, will be the State and the last will be the shareholders.

Nosso Banco is in the peculiar situation in which its two main shareholders are public institutions – the National Social Security Institute (INSS), with 77.2 per cent, and the public electricity company, EDM, with 16.1 per cent. Matsombe confirmed that, in addition to being shareholders, the INSS and EDM both had accounts at Nosso Banco. The total amount they have lost will not be known until Deloitte has done its work, which could take up to a year.

Two days ago, the chairperson of the Confederation of Mozambican Business Associations (CTA), Rogerio Manuel, who claims to speak on behalf of employers, alleged that companies are closing down “every day” because of the Nosso Banco bankruptcy.

But Matsombe knew of no such closures. The liquidation of Nosso Banco was ordered on 11 November, and she did not see how any company could have closed its doors within just a few days of that announcement.

Manuel had also threatened that companies would withdraw their accounts from Mozambican banks, and Matsombe admitted that over the past week some people have been withdrawing their money. She urged them to rethink, and put the money back in the banks.

“Where are they going to put their money? Under the mattress?”, she asked. “That is much less secure than leaving the money in the bank”. Savings left at home could be stolen, she pointed out, or could go up in flames, if there was a fire.

The Central Bank directors denied that the problems of Nosso Banco or Moza Banco could be blamed on the banking supervision department of the Bank of Mozambique. So far this year, the banking supervision department has carried out 20 inspections of commercial banks, said Matsombe, and when anomalies are detected, the central bank makes recommendations that must be complied with in a specified period.

The prime responsibility for the health of a bank lay with its shareholders and then its managers, and not with the supervisory role of the central bank, Blaming the banking supervision department for a bankruptcy, said a third board member, Waldemar de Sousa, was like blaming the police for a traffic accident.

Source: AIM