Trust Bank

Operational Constraints

The bank up until 2014 had been facing serious operation constraints such that it was often described as operating in a very precarious position thereby putting depositors at risk of losing their money. In 2004, it was widely reported that the bank was operating in fits and starts and the majority of its depositors were not able to access their money due to financial constrains that the bank was experiencing.^[1] The expansion of Trust Bank coincided with th deterioration of the Zimbabwean economy and the bank was forced to operate under very difficult conditions which saw it being sidelined by banks such as Stanbic which started rejecting its cheques due to Trust's liquidity problems. Apart from having been forced to operate in a very difficult environment, the management of the bank was also accused of having mismanaged depositor funds and not having put in place adequate control and risk management systems.

Attempts at Luring Investors

In 2013 the bank was said to have been in the process of trying to lure foreign investors to bail out the bank out of its financial crisis. The bank had failed to produce its end of year results for the previous year citing that the delay had been caused by an audit by potential investors who were prepared to pump in as much as US$10 million.^[2] Trust Holdings Limited CEO William Nyemba pointed out that negative media reports had derailed plans to bring the investors on board as they were scared to commit to the bank.^[2]

Cancellation of the Bank's License

The Bank's license has been cancelled on two separate occasions. The first time that the bank's license was cancelled was in 2005 after it had emerged that the bank's management had mismanaged and abused depositors funds among other unethical banking practices forcing the central bank to revoke its license.^[3] The initial closure of the bank was after the reserve bank went on a drive to curb illicit banking activities that were said to have gone rampant in the sector. This triggered a public withdrawal spree in which consumers made long and winding queues to withdraw their money.^[4] The bank was also forced to close a second time after its license had been cancelled following its failure to meet the minimum capital requirements which had been set by the reserve bank. The central bank highlighted that the bank was heavily undercapitalised with a core capital of 1.90 million not to mention that the bank had been posting losses amounting to around 18 million since its inception.^[3] The central bank also pointed out that the bank had been facing critical liquidity challenges emanating from the poor loan book and inadequate working capital and gross abuse of depositors funds.^[3] Following the cancellation of the bank's license in 2013, the bank was placed under provisional liquidation pending a final order but the luquidation order was set aside by the High Court and the central bank was ordered to meet the cost of the suit^[5]

Scandal and Controversy

1. When the bank was closed in 2005, it emerged that the management at the financial institution had been using unorthodox banking practices which had put depositors funds at risk as the bank had become heavily undercapitalised in the process^[3]
2. The second time that the bank was closed, there were strong allegations that there had also been a serious abuse of depositors funds as well as under hand dealings^[3]
3. The bank's image was heavily bruised after it was sued by Emmanuel Makandiwa after the financial institution has failed to to return over two hundred thousand which he had deposited in the bank. It was reported that Makandiwa's church instructed Trust Bank to transfer US$461,150 to its church account but the bank only managed to transfer US$280,000 through several transactions instead of a single transfer leaving a balance of US$181,150.^[6] Trust was also said to have failed to obey instructions from the cleric which instructed the bank to complete the transaction which then compelled UFIC to take legal action against the bank

References