Reserve Bank of Zimbabwe governor Gideon Gono on Thursday said the policy, will ensure that non-compliant institutions exit the market with minimal disruption to the banking sector and inconvenience to the public.
“The objective of financial crisis management is to prevent serious domestic or international financial instability impacting adversely on the real economy,” he said.
He said during 2012, the Reserve Bank shall fine tune its crisis management program to improve its legal, policy and institutional arrangements and general capacity to deal with financial crisis.
“The program aims to increase the country’s institutional capacity to deal with financial crisis effectively and timely, and thus reduce the fiscal, economic and social costs of the crisis. This involves a number of related activities,” he said.
These include contingency planning, which involves developing a sound basis for problem response and crisis management through the design of, or improvement in, contingency plans and their underlying legal, policy and institutional frameworks.
Crisis simulation exercise – this entails participants to experience first-hand realistic crisis scenarios including systemic crises and are designed to identify weaknesses and gaps in existing laws, policies, and procedures.
It will also include early warning and prompt corrective action. “This involves putting in place processes for timely identification of problems, and to act on managements and boards to correct problems before they threaten the bank and its depositors,” Gono said.
He said the other was ‘Problem and Failing Bank Resolution’. This involves strengthening arrangements for formal supervisory measures (such as official warnings), for removal of ineffective managers or board members, and for bank closure or imposition of curatorship and other forms of supervisory interventions to avoid closure.
“Currently, banks are solely relying on their contingency liquidity plans to resolve liquidity distress. This has, however, proved ineffective as most contingent liquidity plans have become dysfunctional in the multi-currency era. This has been compounded by the absence of the lender of last resort function,” Gono said.Post published in: Business