When Royal Bank began operations, Mzwimbi applied to the Central Bank – then under Dr Tsumba, for foreign money to cover supplies, technology and software infrastructure. No foreign money might be availed but instead Royal Bank was exempted from paying statutory reserves for a year, thus releasing funds that Royal could utilize to obtain foreign currency and purchase the required resources. This was a standard procedure and practice of the Central Bank, which was made available to other banking institutions too. This would also improve the bank’s liquidity position.
Even investors are sometimes offered tax double glazing london exemptions to encourage and promote investments in any industry. This exemption was delayed as a result of bungling from the Banking Supervision and Surveillance Department of the RBZ and was consequently only implemented a year later, consequently it would run from May 2003 until May 2004. The early cancellation of the exemption caught Royal Bank by surprise because its cash flow projections had been predicated on those commencing in May 2004.
When the RBZ insisted, Royal Bank calculated the statutory reserves and noted that, due to a decrease in its deposits, it wasn’t eligible for the payment of statutory reservations at that time. After the bank submitted its returns using zero statutory reserves, the Central Bank maintained that the bank was currently due for the entire statutory reserve since inception. In effect that wasn’t being handled as a statutory reserve exemption but much more as a punishment for evading statutory reserves. Royal Bank appealed. There were conflicting opinions between the Bank Supervision and Capital Markets branches on the problem as Bank Supervision surrendered into the validity of Royal’s position. However Capital Markets insisted it had instructions from the very best to remember the full sum of $23 billion. This was driven on Royal Bank and moved without permission to the Troubled Banks Fund at exorbitant rates of 450% p. a.