Get more Mail & Guardian
Subscribe or Login

Reserve Bank: No guarantee municipalities will get VBS money back

The Reserve Bank has committed to recover the monies of retail depositors of VBS Mutual Bank, however the same cannot be said for municipal deposits, a committee has heard.

The standing committee on finance on Wednesday held a briefing on progress made on VBS Mutual Bank, since it was placed under curatorship by the Reserve Bank in March due to a liquidity crisis.

Deputy Reserve Bank Governor Kuben Naidoo briefed the committee on the bank’s status.

“Curatorship is ongoing, we have every intention to continue with curatorship to try protect depositor interest.

“The level of confidence we have that the bank can be saved and is salvageable is lower than the day it started the curatorship,” he warned. “I am not saying zero, I’m not saying there’s no chance, we’ll continue to work in that direction.”

READ MORE: SARB confidence in saving VBS declines

Naidoo previously told journalists at a briefing on the Bank Supervision Department annual report, that the situation at VBS Bank was worse than they thought.

The Reserve Bank also fined VBS R2.5-million and suspended R2-million for the year, for failure to comply with the Financial Intelligence Centre Act.

READ MORE: VBS fined R2.5m for flouting money-laundering regulations

Naidoo explained that the Reserve Bank has not been able to put in place a mechanism to refund depositors of less than R50 000, because the Reserve Bank could not make an unsecured loan to VBS.

“The SARB Act does not allow us to put money in without security. To date we cannot establish the veracity of assets (loans) to determine if there is adequate security to put money in,” Naidoo said.

He added that it should take between two and three weeks to put in place the mechanism to refund retail deposits.

Municipal deposits

Naidoo however said that the SARB cannot explicitly guarantee recovery of municipal deposits. “It is highly likely municipalities will lose a significant portion of the money deposited.”

He said the Reserve Bank is in discussion with National Treasury and the Department of Cooperative Governance and Traditional Affairs (CoGTA) on what can be done, ultimately this is an issue Treasury and CoGTA must deal with as the SARB cannot refund municipalities.

“In an optimistic scenario where we recover all loans, it could take seven to 10 years to recover money to pay depositors, a highly unlikely scenario.”

The process of recovering money is ongoing, Naidoo assured. “I am pretty sure we will be able to pay the bulk of those retail deposits – perhaps even above the implicit guarantee of R50 000, we are working very hard to do that, we are working very hard to do that as quickly as we can.”

He said that the focus has shifted to recovering money and the forensic investigation, commissioned in April to uncover possible fraud at VBS, is at a sensitive stage and cannot be compromised as it may affect the recovery of monies.

Naidoo confirmed it would take two to three months to conclude the work of the investigation. The investigation will also determine if the salvageability of the bank is likely.

Anoosh Rooplal, leading the curatorship team from SizweNtsalubaGobodo, explained that it is necessary to have financial statements of the previous year restated, as credible information is needed to move forward. The outcomes of the investigation are necessary to ensure recoveries are made, he stressed.

READ MORE: VBS-linked Limpopo municipalities face provincial probe

As for the curator’s fees, Rooplal said that the R2.6-million went to SizweNtsalubaGobodo and he had not received monies in his personal capacity. He also said this amount should be benchmarked against other curators’ fees and what the executives of the bank had earned.

We started with a liquidity crisis, but when we got into the bank as curator, in a short space of time we found there were more issues, he told SCOF. A curatorship process is complex, but this particular process with VBS is even more complex given the investigation.

The curator has a 12-person team looking at various issues. The curator has to make big decisions in a short space of time. For a bank, specialist skills and technical skills is required to run it and decisions are more pressured, he emphasised.

“You need experts to save a bank. You can’t take an ordinary CA (chartered accountant) from the street to save a bank, it’s important to understand. We report diligently to the Reserve Bank and the National Treasury.” — Fin 24

Subscribe for R500/year

Thanks for enjoying the Mail & Guardian, we’re proud of our 36 year history, throughout which we have delivered to readers the most important, unbiased stories in South Africa. Good journalism costs, though, and right from our very first edition we’ve relied on reader subscriptions to protect our independence.

Digital subscribers get access to all of our award-winning journalism, including premium features, as well as exclusive events, newsletters, webinars and the cryptic crossword. Click here to find out how to join them and get a 57% discount in your first year.

Lameez Omarjee
Lameez Omarjee
Parliamentary reporter at Fin24.com

Related stories

WELCOME TO YOUR M&G

If you’re reading this, you clearly have great taste

If you haven’t already, you can subscribe to the Mail & Guardian for less than the cost of a cup of coffee a week, and get more great reads.

Already a subscriber? Sign in here

Advertising

Subscribers only

‘The children cannot cope any more’: Suicide in Calvinia highlights...

How Covid-19 has intensified the physical and emotional burdens placed on children’s shoulders.

Capitec Bank flies high above Viceroy’s arrow

The bank took a knock after being labelled a loan shark by the short seller, but this has not stymied its growth

More top stories

The convenient myth of an Africa spared from Covid-19

There are few, if any, studies to support Pfizer chief executive’s assertion that the global south would be more vaccine-hesitant than the north

Council wants Hawks, SIU probe into BAT’s Zimbabwe scandal

The cigarette maker has been accused of giving up to $500 000 in bribes and spying on competitors

How Alpha Condé overthrew Alpha Condé

Since the coup d’état, Guinea’s head of state has been in the custody of the military officers. But it was the president who was the primary architect of his own downfall
Advertising

press releases

Loading latest Press Releases…
×