DPC SUES FAILED BANKS EXECUTIVES:
THE Deposit Protection Corporation (DPC) has started taking legal action against shareholders and directors of banks whose institutions failed due to poor corporate governance.
DPC chief executive officer Mr John Chikura said this in Bulawayo yesterday while responding to questions from the floor during a workshop to create awareness on the operations of the Deposit Protection Scheme run by the corporation.
“You will notice that we have recently started doing this (suing of shareholders and directors) and these court cases are playing out in the courts. None of the cases have come out for hearing yet, but we hope that when that happens we will be successful,” he said.
About eight banks have collapsed in recent years due to alleged lack of corporate governance and corruption among other issues.
The banking institutions that have failed recently include AfrAsia Kingdom (formerly Kingdom Bank), Tetrad, Royal Bank, Interfin Banking Corporation, Trust Bank, Allied Bank and Genesis.
In an interview after the workshop, Mr Chikura said the DPC has since issued summons to shareholders and directors of Royal Bank, Trust Bank and Interfin while others were being worked on. Royal Bank was majority-owned by Jeff Mzwimbi and Simba Durajaji, Trust Bank by William Nyemba and Interfin by Farai Rwodzi, Jeremiah Tsodzai and Ray Njanike.
“These others (the above-named banks) summons have been issued already so the case is waiting to be set down in the courts,” he said.
The DPC is an independent statutory body established by Government in terms of the DPC Act (Chapter 24:29) to administer the Deposit Protection Scheme.
Among other benefits, the DPC guarantees compensation up to the cover limit for eligible deposits in the event of a bank failure of a contributory institution.
The deposit protection also reduces chances of panic withdrawals and bank runs thereby contributing to the stability of the financial sector and overall economic growth.
The corporation began operating on July 1, 2003 and is headquartered in Harare. The corporation has also opened a regional office in Bulawayo to cater for various stakeholders including depositors in Matabeleland region.
Asked why it was seemingly taking them long to save with summons on shareholders and directors whose banks would have collapsed due to abuse of depositors’ funds and reckless lending, the DPC boss said:
“What happens is that when a bank is closed, first of all we will not have any information on how the bank was run. When the bank is closed we move in and the process of moving in to a bank that has been closed takes time.
“For example, in many cases you will find out that their Information Technology (IT) system doesn’t work anymore because they would have failed to pay their subscriptions.
“Therefore the supplier of the IT system takes their password and don’t give them any password to enter their system. So, we have to start negotiating how do you pay those guys (IT system supplier) in order for them to give us access into the system and thus it takes time.”
Mr Chikura said it was also taking them long to resort to legal action against shareholders and directors of the failed banks because DPC needed to first commission a forensic audit, which process to compile the forensic report takes time as well.
“We also need to take an action that is informed by forensic audit in other words you need to commission a forensic audit. That process takes time to get a forensic done and then to get a lawyer to look at what has come out of that report to see whether there is a case for the directors of that bank,” he said.
He said court processes take long to before they are concluded and thus DPC has no influence in terms of the speed the cases can be heard.
In his address, Mr Chikura bemoaned bank failures by indigenous banks saying their collapse was largely to do with corruption and greediness where depositors’ funds were abused by shareholders and directors.
In the era of bank failures, the Reserve Bank of Zimbabwe has also blamed poor corporate governance for the collapse of many banking institutions in the country pointing out that delinquency by shareholders and management had ruined most financial institutions.