Beleaguered VBS Mutual Bank was liquidated on Tuesday following a court order by the high court in Pretoria.
The bank’s business will now be wound up.
At the end of October, the prudential authority — which regulates South African banks — applied to liquidate VBS. The application, the prudential authority said at the time, was because VBS was “hopelessly insolvent and massive frauds have been perpetrated against it.”
The South African Reserve Bank placed VBS under curatorship in March this year after the mutual bank had experienced what had then appeared to be a liquidity crisis.
When a bank is placed under curatorship, it is typically expected to be salvaged. According to Jannie Rossouw, the head of the School of Economic and Business Sciences at the University of the Witwatersrand, once the registrar is of the view that the bank is insolvent, it is “legally obliged to apply to the court for liquidation.”
The reason VBS is being liquidated is to allow people to recover the money they had deposited in the bank. This is made provision for under insolvency laws and the Companies Act. Rossouw, added that the liquidation of VBS “will mean that the recommendations of the investigator into the affairs of VBS can be followed.”
Last month, Terry Motau SC released his explosive investigation titled The Great Bank Heist which explained how almost R2-billion was looted from the bank. Motau’s report — which was commissioned by the Reserve Bank — implicated several highly placed political office bearers in the alleged corruption.
Since the bank’s collapse, the Mail & Guardian’s investigative team has reported how the Economic Freedom Fighters’ Floyd Shivambu’s brother, Brian, was connected to the bank and how former North West premier Supra Mahumapelo “vigorously encouraged” North West municipalities to invest with the bank.
Motau’s report noted that as of April 30, municipal deposits in the bank totalled R1.2-billion.
The collapse of the bank has not only affected the deposits that municipalities had with VBS, it has also cast into doubt whether private individuals will be able to recover their deposits from VBS such as the R370-million deposit by Bophelo Beneficiary Fund and Bophelo Benefit Services which caters for the widows and orphans of former mineworkers.