South African central bank takes control of VBS Mutual Bank

Elias Hubbard
March 13, 2018

During a media briefing in Johannesburg on Sunday afternoon, Kganyago announced that VBS Mutual Bank had been placed under curatorship with immediate effect.

VBS came into prominence in 2016 when it loaned former president Jacob Zuma R7.8 million to repay the state for the cost of non-security upgrades to his rural homestead in Nkandla, KwaZulu-Natal. For now, its planned listing on the JSE has been postponed, Kganyago told journalists.

Reacting to the announcement, Treasury said the Registrar of Banks which is located within the Reserve Bank fulfils a critical role in the regulatory framework to protect depositors, customers, and the shareholders of a mutual bank.

Section 7 of the Municipal Finance Management Act (MFMA) stated that a municipality may not open a bank account with an institution not registered in terms of the Banks Act, and mutual banks, such as VBS, were not registered in terms of the Act, he said. "The colour of money is red, it is green, yellow, it's blue". Why is the Reserve Bank quick in saving a white-owned bank, and quick in placing a black-owned bank under curatorship? "We supervise all banks irrespective of who owns them", said Kganyago.

"We are appealing to people with deposits at the bank to understand that it is protected and government is protecting those deposits". Deputy governors Kuben Naidoo and Francois Groepe echoed similar views. "This is in contrast with liquidation, where the mutual bank is closed down", said Treasury.

SA's big banks are transforming and appointing more black people to top management. Protecting them is a primary task for any banking regulator and, as the Reserve Bank's leadership said, it will regulate all banks in terms of the legislation regardless of their colour. The Minister must instruct the Reserve Bank and other shareholders, like the Public Investment Corporation (PIC) to find a long lasting solution other than placing the bank under curatorship.

The party says it is dismayed by the decision of the "National Treasury as well as the Reserve Bank to oppress and suppress an African-owned VBS Mutual Bank. The Financial Services Board has indicated that there are other related parties that may be impacted by the curatorship", said Treasury. VBS depositors Naidoo advised that people who have loans from VBS should continue to pay them off. Those with small deposits, less than R50 000, will be able to access their money overnight, he said.

SA has a decent record of getting banks, such as African Bank, out of curatorship, so we can but hope that depositors' losses are not too large. Naidoo said that the curator will likely develop a plan to manage the liquidity going forward. Instead of allowing the bank to wind down the Municipalities' deposits over a period of time, National Treasury issued an instruction, knowing that such an instruction will immediately collapse the bank.

Other reports by Click Lancashire

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