/ 28 April 2016

Reserve Bank to stay out of Gupta saga

Going up: The Reserve Bank reports that the current account deficit for the fourth quarter of 2012 was higher than expected.
Going up: The Reserve Bank reports that the current account deficit for the fourth quarter of 2012 was higher than expected.

The South African Reserve Bank will not be intervening in the Gupta’s battles with the country’s banks, its chief of staff said on Thursday morning. 

The central bank also distanced itself from the ministerial committee recently appointed by Cabinet to intervene with the country’s major four banks, Standard Bank, Absa, First National Bank or Nedbank, on behalf of the Gupta’s Oakbay Investments.

“The South African Reserve Bank (SARB) is not part of the ministerial committee,” Bulelwa Boqwana, the reserve bank’s chief of staff said.

“As a prudential regulator, the SARB regulates and supervises the prudential requirements of commercial banks. The SARB is not in a position to get involved in differences between banks and their clients.” 

She referred market misconduct and consumer disputes to the national consumer commission or the banking ombudsman.

After both ABSA and FNB terminated banking relations with Oakbay and its related entities, the company said it has been unable to secure any further banking services and it may not be able to pay its staff salaries.

The Gupta family owns Oakbay Investments, the holding company for a range of interests including listed Oakbay Resources and Energy, as well as The New Age newspaper and broadcaster ANN7.

Cabinet instructed Finance Minister Pravin Gordhan, Labour Minister Mildred Oliphant and Mineral Resources Minister Mosebenzi Swane to “engage” with the banks after Oakbay Investments wrote to government, pleading for it to intervene. 

Opposition parties have questioned Cabinet’s decision, arguing that it only reinforces the perception of undue influence over the state by the Gupta family.

The Business Day reported on Thursday that Gordhan was not present at the Cabinet meeting where the decision to intervene was taken. Gordhan was in the United States at the time.  

The newspaper said that Gordhan was understood to be unhappy at being delegated to the committee of ministers.

The Banking Association South Africa said in a recent statement that each bank took the decision separately. 

The industry is one of the most highly regulated sectors and must comply with various anti-money laundering and other regulations under the Financial Intelligence Centre Act (FICA).

“These regulations make it incumbent on banks to conduct a detailed due diligence on clients, particularly those of a substantive nature and those that are in the public domain,” it said. 

“Such due diligence is conducted on an ongoing basis to ensure the bank is aware of any significant changes in the affairs of the client, particularly to satisfy itself that a client is abiding by FICA regulations and anti-money laundering regulations.”

But the Democratic Alliance’s spokesperson for finance David Maynier has requested that the Reserve Bank conduct an investigation into whether the banks which had a business relationship with the Gupta’s in fact complied with all relevant FICA provisions, particularly requirements to conduct enhanced due diligence on politically exposed persons.

Maynier said in a statement that the “sudden decision by certain banks to terminate their business relationships with the Guptas” raises the serious question over whether the banks did comply with FICA.

“Banks could hardly claim not to have known about the political influence of the Guptas,” said Maynier particularly following the reports such as the appointment of President Jacob Zuma’s son, Duduzane Zuma, to the board of subsidiaries Oakbay Investments.

The Reserve Bank did not respond to specific questions regarding whether it had received the DA’s complaint or whether it would be investigating it. 

Neither Oakbay Investments nor the Ombudsman for Banking Services responded to emailed questions.