The Reserve Bank of Zimbabwe (RBZ), or the central bank, said Monday that four of the 19 banks operating in the country are financially distressed and could fail to stay afloat if no measure comes out to improve liquidity.
In the mid-term monetary policy statement released Monday, RBZ governor John Mangudya said the distressed banks, occupying less than 10 percent market shares each in terms of loans, deposits and assets, were a matter of concern.
The four -- Metbank, Allied Bank, AfrAsia and Tetrad -- face liquidity and solvency challenges, the central bank said. Their market share in terms of loans is 8.8 percent, assets 7.2 percent and deposits 6.7 percent as at June. 30, 2014.
The RBZ, he said, has encouraged these institutions to come up with credible plans to reverse their waning financial conditions and warned that it may eventually be forced to act if the situation does not improve.
"Shareholders and boards of the distressed banks have been directed to finalize implementation of their turn around plans, failure of which the Reserve Bank will be left with no option but to intervene and institute appropriate supervisory action," he said.
He advised the banking institutions to seriously consider mergers and voluntary surrender of licenses if necessary.
The level of non-performing loans had risen to 18.5 percent on June 30, far exceeding the international benchmark of 5 percent and threatening financial stability and economic growth.
However, the country's overall banking sector remained safe and sound, he added.
A total of 14 out of 19 operating banking institutions ( excluding POSB) met the required minimum capital requirements of 25 million U.S. dollars on June 30.
On aggregate, core capital for the banking sector amounted to 753.09 million dollars over the six months to June, down from 790. 35 million of Dec. 31, 2013.
Mangudya attributed the reduction in the total core capital to loan loss provisions and subdued earnings performance by some banking institutions.
The central banker also announced a three-tier system for banks ' compliance with minimum capital requirements given the macroeconomic challenges constraining the capitalization initiatives by banks.