BOZ COMMENCES PAYMENT OF INVESTRUST DEPOSITORS

By Arnel Chitundu

BANK of Zambia Governor Denny Kalyalya has announced that the first payment to depositors of Investrust Bank PLC in possession will be made by April 26, 2024.

Dr. Kalyaya said BOZ was alive to the concerns of depositors on whether they will have access to their deposits or not, as he assured depositors that their deposits are safe as the Government will provide support to bridge the gap between their assets and liabilities.

He added that the Government had offered K1 billion fiscal support to attend to Investrust bank in possession insolvency.

He said this was critical in the context of the need to protect the integrity of the financial system and to support other key measures to promote growth and financial inclusion including recent conclusion of the debt restructuring with the Eurobond holders and measures taken to revive the mining sector.

“During this period, some payments will be made to depositors and all depositors are expected to have full access to their funds on the basis of the statements of affairs as at April 22nd 2024,” Dr. Kalyalya said.

He explained that the fact that Investrust bank was insolvent at the point of possession meant they were not in a position to pay off all their depositors, Bank of Zambia took possession of Investrust bank PLC (in possession) on 2nd of April 2024 position.

He stated that the recent decision taken by BOZ to take possession of Investrust Bank PLC due to insolvency meant the capital position of investors was below zero and its liabilities exceeded its assets.

He explained that the decision, like all possessions and liquidation decisions, was a difficult one thus, not taken lightly by BOZ and other banks, as financial institutions operate on the basis of trust and serve the people.

 Dr. Kalyalya said having a failed institution if not addressed properly creates challenges that are not needed.

He said the process will take some time, as BOZ is currently working hard to have statement of affairs prepared within six weeks and have options prepared for how to resolve Investrust in possession.

He stated that the decision taken was arrived at, after all other efforts failed to deliver the assurance that the institution could continue.

He clarified that the 90 days as speculated in the media on when the state affairs of the bank should be revealed was based on previous provisions, contrary to the current provision which states that things have to be done as quick as practically possible and within 6 weeks BOZ would be able to present the statement of affairs as there was no time frame given on that.

 “At the time of taking possession of Investrust, BOZ estimated that the level of insolvency was in the order of K850 million, however it is a preliminary position which will only be confirmed once the preparation of statement of affairs has been concluded,” he said.

 Dr. Kalyalya said the bank has pre- existing liquidity challenges which became serious in recent months, thereby compelling it to expensive short-term funding sources, a symbol that the operations of the bank were unsustainable.

He added that BOZ continued to engage shareholders to resolve challenges and find a suitable equity partner for the bank but that did not materialize and was not enough to put the bank on a sustainable place.

“In view of its insolvency position, this meant failure was imminent and BOZ was left with no choice but to take immediate action, to prevent disorderly exit of the bank from the financial sector.

He said the action by BOZ was to forestall further deterioration of the value of the assets, protect depositors and ultimately preserve financial stability.

“At the time of taking possession, the shareholding of Investrust was as follows: major shareholder is ZCCM Investment Holdings, which holds 71.4 percent, Bank of Navies, International Limited (BONNIE), 24.1 percent and others account for 4.5 percent shares,” he added.

Meanwhile, Deputy Governor Operations, Dr. Francis Chipimo explained that the exercise involved sending Investrust bank PLC, staff to each of the 20 branches including head office located in 6 provinces and involved staff members of 60 people.

Dr. Chipimo said in a period of 5 days, the bank staff verified the monies held by the branches and secured important documents and assets.

“Investrust bank staff were addressed by BOZ as they took possession and they have been requested to remain at home whilst the possession proceeds and further guidance will be provided to the bank as possession proceeds,” he said.

Dr. Chipimo said BOZ will facilitate the first payment to all depositors up to a maximum of 500 thousand kwacha as it will cover over 90 percent of the total deposit accounts and the first payment will be made by 26th April 2024, as a commitment made so far.