Tanzania to alter commercial bank requirements

Jun 14, 2010

The Bank of Tanzania wants to increase the minimum capital requirements for commercial banks, with the main goal of "strengthening crisis preparedness".

A statement on the Bank's website said it plans to raise the minimum capital requirements - below which the amount of financial resources should not fall for security - from five billion Tanzanian shillings (€2.8 million) to 15 billion Tanzanian shillings. It is hoped by bolstering its risk management, the expanded capital will help "facilitate a rapid response in the event that a crisis emerge".

Maximum insurance for each depositor at every bank will also be trebled from 500,000,00 Tanzanian shillings. This means in the event of a commercial banking collapse, customers could be compensated up to that amount.

For most of 2009-10 Tanzania experienced double-digit inflation, however, this dropped to single digits from February 2010. "Inflation is expected to slow down further in the medium term … with prudent fiscal and monetary policies," which were previously "relaxed" to allow liquidity to the economy, the Bank noted.

Liquidity in the banking system, along with slow credit growth, came after commercial banks were cautious in their lending. The Bank of Tanzania said there is increasing evidence the country can boost its economic sustainability by deploying a monetary policy that strives to secure long-term price stability.