Government has pledged K1 billion support to Investrust-in possession to ensure that depositors do not lose their money.

Bank of Zambia (BOZ) Governor Denny Kalyalya said the Central Bank requested for government support in paying out depositors of the Investrust bank – in Possession so as to protect the integrity and stability of the financial sector.

Dr Kalyalya said this during a Press briefing at the Bank of Zambia in Lusaka.

Dr Kalyalya disclosed that at the point of taking over the bank, it had an estimated insolvency rate of K850 million.

“However, this is a preliminary position, which will only be confirmed once we have concluded the preparation of the Statement of Affairs. In addition, Investrust Bank-in-Possession had pre-existing liquidity challenges which became serious in recent months, thereby compelling it to resort to the expensive short-term funding sources,” he explained.

Dr Kalyalya explained that what was asked of the government is K1 billion support as a buffer as it is a tentative number that may go down once the Statement of Affairs has been concluded.

“This possession, like any other possession decision, is a very difficult one and is not taken lightly by BOZ because financial institutions operate on the basis of trust of the people they serve. Their failure has significant consequences on their clients,” he said.

Dr Kalyalya explained that when licensing an institution to operate as a bank, BOZ expectation is that the institution being licensed must succeed in playing their role of providing financial services to their clients and the economy at large.
In order to clear the misconception surrounding the possession of Investrust Bank, he cited the amended 2020 BOZ Act which provides no timeframe for the preparation of the Statement of Affairs.

“We expect that within six weeks we should be able to present this Statement of Affairs. Our concern was that, one day you wake up and the bank does not open. The action to possess Investrust Bank was to forestall further deterioration of the value of the assets, protect depositors and ultimately preserve financial stability,” he added.

Dr Kalyalya assured the depositors that their deposits are safe as the government will provide support to bridge the gap between the assets and liabilities of Investrust-in-Possession.

He explained that this fiscal support is 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.

Meanwhile, Deputy Governor Operations Francis Chipimo narrated that the possession process involved sending staff to all the 20 branches of Investrust-in-Possession, located in six provinces including the head office to verify monies held by the branches and secure the important documents and assets.

Dr Chipimo stated that the staff were further requested to stay home while the possession proceeds.
“The BOZ will facilitate the first payment to all depositors up to a maximum of K500,000. This payment will cover over 90 percent of the total deposit accounts,” he added.

Dr Chipimo appreciated and commended the government for the support and collaboration provided in the whole possession exercise, further saying BOZ will continue to provide periodic updates to the public on the status of the possession through print and digital platforms.

He further appealed to customers with outstanding loans to remain current on their outstanding loans and will be advised where to make their loans repayments.