The Reserve Bank as well as the curator wrote off this investment since in that point FML was suspended at the ZSE. However the fact that it was suspended did not invalidate its value. Recent events have proven that this investment has generated huge capital worth for Regal Asset Managers since the ZSE rebounded. Nevertheless the curator appreciated this investment negatively. Around March 2004 there had been a contagion effect at FML as a result of challenges at Trust Bank. This resulted in the forced death of the FML CEO and chairman. FML was suspended by the local bourse as investigations into the funding arrangement of Capital Alliance’s acquisition were completed. Due to the pressure caused on FML, it wanted to withdraw the double glazing rainham deposits followed by Royal Bank, contrary to the arrangement.
FML couldn’t find and return the treasury bills that was provided as collateral by Royal. Royal Bank guessed that these had been put with ENG, yet another asset management company which collapsed in December 2003. A public row broke out. Royal Bank executives sought counsel from Renaissance Merchant Bank, which had brokered the deal, and also the Chairman of the ZSE, who both agreed with Royal that the deal was legitimate and FML had to honor the agreement. At this point FML sought court intervention in an effort to induce Royal Bank into liquidation. The curator contested the FML place leading to his carrying it for mediation. Royal’s position remained that if FML fails to return the securities then it will not get the funds.
Royal bank directors claimed political hindrance on the problem. The Royal Bank executives believe that the governor, against his better judgment, decided to act against Royal Bank under the pretext of the political pressure. In retrospect, the governmental support for cracking the whip in Royal gave credence to the rumour that the governor had an underlying agenda in carrying Royal and consolidating it into ZABG due to its powerful branch network.