## Zimbabwe: FSSR Follow Up Technical Assistance—Implementation of the Basel II/III Capital Framework

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**Canonical URL:** [Zimbabwe: FSSR Follow Up Technical Assistance—Implementation of the Basel II/III Capital Framework](https://www.imf.org/-/media/files/publications/hls/2023/english/hlsea2023014.pdf)

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### Background
- Technical Assistance mission from the Monetary and Capital Markets Department of the International Monetary Fund conducted a virtual mission from May 8 to 19, 2023.
- Purpose: assist the Reserve Bank of Zimbabwe (RBZ) on implementing the Basel II/III capital framework, considering Zimbabwe’s specific circumstances and applying proportionality.
- Mission objectives:
  - Review Zimbabwe’s prudential capital framework (laws and regulations).
  - Identify areas for updating capital requirements.
  - Discuss findings with RBZ management.
  - Make recommendations for drafting amendments aligned primarily with the Basel III framework, particularly focusing on standardized approaches.
- Context: The Financial Sector Stability Review (FSSR) conducted in November 2018 identified areas requiring improvement and technical assistance in Zimbabwe’s regulatory and supervisory frameworks, including strengthening the capital framework for the banking sector.
- Prepared by Paula Cristina Seixas de Oliveira and João Luis Resende (External Experts).

### Summary of Findings
- The mission worked with the RBZ supervisory team to enhance capacity to draft updates for capital requirements based on the Basel III framework.
- Current practices:
  - Zimbabwean banks calculate capital for credit risk using the Basel I regime.
  - For market and operational risk, banks use Basel II standardized approaches.
  - Since 2012, the RBZ has been conducting a parallel run of banks’ capital calculations based on a modified Basel II approach for credit risk.
- During the mission, discussions with RBZ management and supervisors covered international standards, best practices, and main challenges, focusing on:
  - Basel III standardized approaches for credit, operational, and market risks.
  - Capital definition.
  - Leverage ratio.
  - Large exposures.
  - Capital conservation buffer.

### Summary of Recommendations
- Draft a new version of capital definition in line with Basel III requirements.
- Advance capital requirements for credit, market, and operational risk in line with Basel III standardized approaches.
- Update requirements for the leverage ratio.
- Introduce the capital conservation buffer.
- Prioritize updating the RBZ regulation on large exposures and limits, as it currently deviates from the Basel Framework.
- Provide guidance and concrete steps for drafting new regulations consistent with Basel III standardized approaches.

### Capacity Building and Next Steps
- The mission focused on capacity building of the RBZ’s supervisory team to ensure management of the RBZ Banking Supervision Division and supervisors are ready to lead and start implementing the Basel III capital framework.
- The RBZ committed to draft the regulations’ package, which will be reviewed during the next TA mission.

*IMF — Summary Technical Assistance Report: Zimbabwe: FSSR Follow Up Technical Assistance—Implementation of the Basel II/III Capital Framework (October 2023, Prepared by Paula Cristina Seixas de Oliveira and João Luis Resende).*

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_Source: https://www.imf.org/-/media/files/publications/hls/2023/english/hlsea2023014.pdf_