K10 BN Financing Facility Effective Tomorrow
According to the Bankers’ Association of Zambia (BAZ) a K10 billion Targeted Medium-Term Refinancing Facility announced by the Bank of Zambia (BoZ) earlier this month with be effective as of Wednesday April 15.
The Association confirmed that its member organisations will offer loan restructuring and payment holidays to depositors who are in otherwise good standing but are currently facing financial challenges as a result of the COVID-19 pandemic.
The establishment of a Targeted Medium-Term Refinancing Facility with an initial amount of K10 billion to provide medium term liquidity was one of a series of measures announced by BoZ in response to the deteriorating macroeconomic environment and the coronavirus.
Commenting on the measures the BoZ has stated, “The Zambian economy has been facing significant macroeconomic challenges as reflected in low growth, high fiscal deficits, rising inflation and debt service obligations as well as low international reserves. The outbreak of COVID-19 pandemic has compounded the situation, resulting in unprecedented global public health and economic crises. Although the full impact of the COVID-19 shock on public health and the economy cannot be determined at the moment, indications are that it will be unprecedented.”
Other measures announced by the Bank include:
Scaled up open market operations to provide short-term liquidity support to commercial banks on more flexible terms than those obtaining before the outbreak of COVID-19;
Revised rules governing the operations of the interbank foreign exchange market to support its smooth functioning, strengthen market discipline and provide a mechanism for addressing heightened volatility in the exchange rate in periods of stress;
Revised loan classifications and provisioning rules through the issuance of new Directives as the replacement to Statutory Instrument No. 142 of 1996, which is in the process of being revoked;
Extended the transitional arrangement provided for under CB Circular No, 11/2017;
Allowed eligible non-bank financial institutions to henceforth partially use capital instruments that would not ordinarily qualify as common equity Tier 1 and Tier 2 capital, for purposes of computing regulatory capital;
Stepped up sensitization and and is encouraging the use of digital channels and contactless mobile payment mechanisms aimed at preventing the spread of the disease by minimizing person-to-person contact, decongesting banks and other financial institutions premises and reduced use of cash;
Implemented Business Continuity protocols that will ensure that systemically important payment systems and financial market infrastructures remain available.
The Association has welcomed the measures with Chairperson Herman Kasekende quoted as stating, “The Association warmly welcomes the announced stimulus package and the accommodative loan loss provisioning standards issued under Gazette notice No. 287 of 2020, and the moratorium on the application of IFRS 9 accounting standards to help protect businesses and households from the financial shocks related to COVID-19. BAZ would like to express its gratitude to the staff of all the banks, who continue serving the public during this very trying period. We also commend BoZ and government for the timely interventions and collaborations,”
Kasekende also stressed the important of trying to use digital means to conduct business in order to reduce possible exposure to the virus stating, “Our earnest appeal is that clients should transact from the safety of their homes through digital channels (online and mobile banking) and only visit branches when absolutely necessary.”