Gupta allies trying to buy a bank face intense scrutiny

Gupta allies Salim Aziz Essa and Hamza Farooqui will require Finance Minister Pravin Gordhan’s sign-off to buy Habib Overseas Bank in a deal worth R450-million.

They will also face in-depth scrutiny from the Registrar of Banks, headed by South African Reserve Bank deputy governor Kuben Naidoo.

The Competition Commission said on Sunday that two businesses – created by Essa and Farooqui shortly after the Guptas’ bank accounts were blacklisted last year – had been given antitrust clearance to proceed with a merger with Habib Overseas Bank.

Habib is one of the 21 banks on South Africa’s national payment system and, according to its website, targets all individual and commercial customers.

The Mail & Guardian reported in November that the duo had offered Luxembourg-based company Pitcairns, which owns Habib, R450-million for the bank.

Naidoo said on Tuesday that he has received an application regarding the change of ownership of Habib Overseas Bank and the application is being considered.

“If a company wants to acquire 15% or more of a bank, they have to get permission from the Registrar of Banks,” he said. “If they seek to acquire more than 49% of a bank, they require the approval of the minister of finance on the advice of the registrar.”

This means the Gupta allies will need Gordhan’s approval as they seek to buy the bank.

The Guptas are due to respond this week to a court bid by Gordhan that seeks to prevent the politically influential family from forcing the finance minister to intervene in their bank troubles.

The Guptas said they plan to reveal “how they are victims of a planned, concerted and politically-driven smear campaign” on Friday, when they file responding court papers in the high court in Pretoria, eNCA reported.

‘Registrar can do background check of the acquiring entity’

Naidoo said the registrar has the right to conduct a fit and proper persons test on an entity seeking to own more than 15% of a bank.

“The criteria for such a test includes, but is not limited to, fiduciary oversight capacity as well as the background of the acquiring entity in terms of governance, integrity and soundness.

“The registrar’s office is also permitted to conduct fit and proper persons tests on key executives and certain non-executive directors of the bank.

“The registrar’s concern in conducting these tests includes safeguarding customers, ensuring the soundness and safety of the institution, the financial capacity of the entity (including during a crisis), the stability and strategy of the entity and compliance with laws and regulations governing banks in South Africa.”

The Competition Commission said it approved the intermediate merger without conditions “whereby Vardospan intends to acquire Habib Overseas Bank”, it said in a statement on Sunday.

Vardospan, the company set up by Essa and Farooqui, paid the bank R450-million for the merger to take place, a report shows.

Gupta banking woes
Last year, South Africa’s top four banks closed Gupta-owned business accounts amid allegations of state capture and corruption that stem from their close relationship with President Jacob Zuma.

Gordhan’s application in October revealed that the Gupta family is under investigation by the Financial Intelligence Centre for more than 70 banking transactions involving almost R7-billion.

His application also forced the banks to reveal why they cut ties with the Guptas, which they revealed in responding papers: the main reason is linked to politically exposed people, reputational and business risk and the identification of suspicious transactions.

The Guptas, who are still trying to sell their businesses, have been using the Bank of Baroda to conduct business, but the Indian bank has come under pressure, including being mentioned several times in the public protector’s 2016 State of Capture report. – Fin24

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