The final death knell sounded for defunct VBS Mutual Bank this week as the prudential authority of the South African Reserve Bank applied to liquidate it. But the central bank is not the first to take this step.
The Mahikeng local municipality had already applied to the Limpopo division of the high court to wind up VBS on October 19 and the matter is to be heard on November 6, a week ahead of the Reserve Bank’s application.
It remains to be seen what the courts will make of this, and whether it will unduly delay the closing of the bank and the recovery of lost funds.
The Reserve Bank would not comment as the matter was “sub judice”, whereas the municipality did not respond to several calls and emailed questions seeking comment.
VBS’s closure has been looming since an investigation, commissioned by the Reserve Bank and undertaken by advocate Terry Motau, found that almost R2-billion has disappeared from the mutual bank in a web of fraud and corruption.
Motau recommended in his report the “urgent” winding up of VBS, as there was “no prospect of saving” the mutual bank.
The chief executive of the prudential authority, Kuben Naidoo, argued in the application to the high court in Pretoria this week that only the authority could apply to close VBS.
“It is the prudential authority which should, in the context of VBS, be in control of the process of terminating the curatorship of VBS and of placing it in winding-up,” he said.
Naidoo said the municipality had not complied with the Mutual Banks Act, which requires that a liquidation application for a mutual bank must first be lodged with the prudential authority. This is to enable the authority to report to the court any facts to justify, postpone or dismiss a liquidation application.
Naidoo also said the Limpopo division of the high court — where Mahikeng’s application was made — does not have jurisdiction over the matter because VBS’s commercial offices in Sandton have, since it was placed in curatorship, been its head office.
The municipality’s acting manager, Mooketsi Molamu, said in an affidavit that it had applied to liquidate the bank after it was found that the Mahikeng municipality had unlawfully invested almost R85-million with VBS. According to Molamu, the municipality has suspended municipal manager Thabo Mowkena because of the investment, and decided to institute disciplinary proceedings against him.
Mahikeng is asking the court to appoint a liquidator so that it can embark on a “thorough investigation” into the fraud at VBS.
Naidoo, meanwhile, has recommended that the bank’s curator, Anoosh Rooplal, be appointed the liquidator. This is because Rooplal has “been inextricably involved in the affairs of VBS” since it was placed under curatorship in March.
It would be “to the detriment of the creditors of VBS if delays are occasioned as a result of a newly appointed individual with no knowledge of the matter having to take the time that will be required to get up to speed, so to speak, with the mountainous volume of information and documentation uncovered by the curator and the investigator”, he said.
Naidoo added: “A substantial amount of time will have to be expended on this exercise to enable [them] to proceed in accordance with the recommendations as set out in the investigator’s report and to pursue the recoveries that are required for the benefit of the creditors of VBS.”
With a guarantee from the treasury, the Reserve Bank has provided small retail depositors at VBS — up to 97% of its clients — with cover for losses up to R100 00.
Commercial deposit holders are not covered by the guarantee. This includes the 14 municipalities that unlawfully placed a collective R1.2-billion with VBS.
The Reserve Bank has come under political pressure to save the bank. But, in his affidavit, Naidoo said the curator believed “there is no reasonable probability that the continuation of the curatorship will enable VBS to pay its debts or meet its obligations and become a successful concern”.
“VBS is hopelessly insolvent, both factually and commercially,” he continued. “Against the background of massive frauds and the theft of depositor funds it is of necessity and in the interests of the creditors of VBS and the public that VBS is wound up as a matter of urgency”.