Former Mozambican PM calls for trust in financial system under stress

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Former Mozambican PM calls for trust in financial system under stress

2:09 CAT | 18 Nov 2016

Lusa / Former Prime Minister of Mozambique Luisa Diogo (R) seen here with former First Lady of Mozambique Graça Machel.

The former Mozambican prime minister and current chairman of Barclays Mozambique’s board of directors, Luísa Diogo, yesterday called for calm and confidence in the financial system, in a period of a stress with no reason, because the country has experienced regulators.

“We can feel a certain ‘stress’ in the financial system and we have to restore trust. And we must also trust, as bank managers, that our regulator knows very well what it is doing and that we are not alone in this process,” Luísa Diogo told Lusa on the sidelines of a conference in Maputo promoted by Exame magazine and Barclays Mozambique bank.

On Friday, the Bank of Mozambique decided to liquidate ‘O Nosso Banco’, majority-owned by the National Social Security Institute, for presenting a “non-viable situation”, and triggered the Deposit Guarantee Fund mechanism.

This is the second financial institution Mozambique’s central bank has intervened in, after the supervisor ordered the suspension of the board of directors and executive committee of Moza Banco, part of Portuguese bank Novo Banco, in September, to “protect the interests of depositors”.

According to Luísa Diogo, prime minister of Mozambique between 2004 and 2010, the governor of the Bank of Mozambique, Rogério Zandamela, and the Minister of Economy and Finance, Adriano Maleiane, “are experienced people”. She recalled previous cases of bank restructuring and liquidation and said that “we must trust that the country knows how to do these things”.

The liquidation of ‘O Nosso Banco’ and the small Deposit Guarantee Fund repayment of 20,000 meticais (EUR 240.00), for individual depositors only, are creating a climate of concern regarding the Mozambican banking system.

Rogério Manuel, president of the Confederation of Economic Associations of Mozambique, the country’s largest business entity, warned on Tuesday of the risk of insolvency of more financial institutions and questioned the usefulness of companies keeping their assets deposited in Mozambican banks.

“We have to cross this desert with due serenity because the financial system is very sensitive to people’s expectations, concerns, behaviours, convictions and suspicions,” said Luisa Diogo.

The head of Barclays Mozambique argues that, at this stage, communication from the government and the regulator with both commercial banks and depositors “is fundamental”.

“To make an appearance and talk, like we Mozambicans are used to, is key to calming the system because there is no reason for the system to be experiencing the stress it is experiencing,” said Luísa Diogo, insisting that trust in the relevant institutions is the “only way” to stabilise the financial sector.

‘O Nosso Banco’ was founded in 1999 as ‘BMI-Banco Mercantil e de 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 Mozambique Electricity (15 percent) and SPI – Gestão de Investimentos, a company linked to top figures of the ruling Liberation Front of Mozambique (Frelimo) party.

Unlike ‘O Nosso Banco’, the ‘Moza Banco’ was not liquidated and is being prepared for sale.

Source: Lusa