FBC shelves merger plans

Published: 04 September 2013

FBCH has put on hold plans to merge its banking and mortgage lending units until the central bank clarifies the bank's recapitalisation deadlines.

The group intends to combine FBC Bank and FBC Building Society as part of strategies to comply with the RBC’s revised minimum capital thresholds.

In August last year, FBC Holdings (FBCH), which owns both the bank and the building society, said it would merge the building society into the commercial bank to meet the minimum capital requirements after the central bank hiked the thresholds by up to 700 percent.

Commercial banks’ minimum capital requirements were increased to $100 million from $12,5 million while building societies' new capital levels were moved to $80 million from $7,5 million.

Commercial banks are expected to increase their minimum capital to $50 million by June 30, 2013.

In total, the banks are expected to raise at least $3,6 billion in fresh capital to fortify their balance sheets following the surprise move by the central bank that left struggling financial institutions battling to seek recourse from elusive offshore investors.

Central bank governor, Gideon Gono, told a Confederation of Zimbabwe Industries (CZI) conference that the RBZ would extend the deadline to 2020.

The banking sector did not expect the revision, but it was a welcome relief for an industry that had argued that the minimum capital requirements would discourage fresh investment and militate against ongoing efforts to mobilise lines of credit.

FBCH chief executive officer, John Mushayavanhu told analysts in Harare that his group could abort the planned merger if there were changes to the RBZ deadlines.

"That decision (extending minimum capital compliance deadline) has not been officially communicated to us," Mushayavanhu told analysts.

"But if we are advised otherwise, it may not be necessary to merge the bank and the building society," the FBCH CEO said.
- businessdaily