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

IMF Staff Country Reports, October 19, 2023

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Canonical URL: Zimbabwe: Technical Assistance Report—FSSR Follow up Technical Assistance—Implementation of the Basel II/III Capital Framework

Purpose: Discusses the Financial Sector Stability Review follow-up technical assistance and implementation of the Basel II/III capital framework for Zimbabwe.
Key institutional focus: Reserve Bank of Zimbabwe (RBZ) should update current capital regulations in line with the Basel II/III framework.
Current practice: All banks in Zimbabwe use standardised approaches for calculating risk-based capital requirements.

Standardised approaches are currently used by all banks in Zimbabwe for risk-based capital calculations.
The Standardised Approach of Basel III introduces increased granularity and risk sensitivity that could be useful for calculating capital requirements for credit risk in Zimbabwe.
Implementation of the Basel III Standardised Approach for operational risk requires adjustments in banks’ data collection processes.
Implementing Basel III capital requirements for market risk requires improvement of trading book identification criteria and a few updates necessary to move to the Simplified Alternative Standardized Approach.
The RBZ should conduct impact studies to facilitate assessment of the transition to Basel III capital requirements.

Update RBZ capital regulations to align with the Basel II/III framework.
Adopt the Basel III Standardised Approach for credit risk to leverage increased granularity and risk sensitivity.
Adjust banks’ data collection processes to support the Basel III Standardised Approach for operational risk.
Improve trading book identification criteria and implement the necessary updates to move to the Simplified Alternative Standardized Approach for market risk.
Conduct impact studies to assess effects of the transition to Basel III capital requirements.

Data collection: Operational risk capital calculation under the Basel III Standardised Approach requires enhancements to banks’ internal data collection processes.
Market risk: Moving to the Simplified Alternative Standardized Approach implies clarifying and improving trading vs. banking book identification and implementing targeted regulatory updates.
Transition assessment: Impact studies are essential for the RBZ to evaluate the quantitative and qualitative effects of adopting Basel III capital rules.