Aug. 25 (Bloomberg) -- The Reserve Bank of Zimbabwe created a company that will buy bad debt from banks.
The Zimbabwe Asset Management Corp. will purchase non-performing loans, the central bank said in its monetary policy statement today. Banks will sell the debt under commercial terms, and assign collateral and all other rights.
The company will seek “to clean up and strengthen banks’ balance sheets and provide them with the liquidity to fund valuable projects for the economy to rebound and to mitigate loss of confidence,” the bank said.
Non-performing loans at Zimbabwean banks swelled to 18.5 percent of total loans, or $705 million, in June from 1.6 percent in 2009, the central bank said. The high level of bad debt is the key threat to the country’s banking industry, Harare-based IH Securities said in May.
The company will finance the purchases through “a combination of non-funded lines of credit, new inflows, long-term bonds and treasury bills,” the central bank said.
There are 19 banks operating in Zimbabwe, including units of London-based Standard Chartered Plc and Barclays Plc, and South Africa’s Standard Bank Group Ltd.
To contact the editors responsible for this story: Nasreen Seria at email@example.com Andres R. Martinez, Kevin Costelloe