Reserve Bank resists pressure to save VBS
• No option but to apply for liquidation, says senior official • NPA considers racketeering charges
The Reserve Bank has pushed back on political pressure to save VBS Mutual Bank, which collapsed in one of the country’s worst corporate fraud scandals, with directors stealing about R2bn.
A day after President Cyril Ramaphosa told parliament that the VBS model should be raised from the ashes, the central bank’s deputy governor and Prudential Authority CEO Kuben Naidoo said on Wednesday there was no option but to apply for the liquidation of VBS once it became clear that it was insolvent.
EFF MP Mbuyiseni Ndlozi on Wednesday accused the Bank of being hell-bent on killing VBS, saying it had diverted from its previous practice of trying to save troubled lenders.
Yunus Carrim, the chair of parliament’s standing committee on finance, said in October that every attempt should be made to rescue the mutual bank and that its disappearance would be a setback for transformation in the sector.
VBS, set up in the former Venda homeland, made national headlines in 2016 when it lent former president Jacob Zuma almost R8m, after former public protector Thuli Madonsela ordered him to repay the state for upgrades to his Nkandla homestead.
The bank collapsed in March due to fraud and corruption by its directors. It later emerged that the ANC had received R2m from VBS’s biggest shareholder, while the DA in October said parliament would start an investigation into EFF deputy president Floyd Shivambu over payments allegedly received via his brother.
Advocate Terry Motau implicated 53 politicians and executives and other associates in his report on the looting, called The Great Bank Heist. The head of the Hawks told parliament on Wednesday that the organisation, which targets organised crime, had obtained statements from at least 65 witnesses, while the National Prosecuting Authority (NPA) said it was considering racketeering charges against those implicated. Naidoo told MPs on Wednesday VBS
was “massively insolvent”, to the tune of about R372m. The Reserve Bank launched a court application on October 29 for the mutual bank’s liquidation.
According to legislation, once the Prudential Authority has established that a bank is insolvent, it is “legally obliged to approach the courts to apply for liquidation of the bank”.
“We don’t have significant discretion on this matter,” Naidoo said.
The process could take several years and would entail recovering money owed to the bank, selling assets and closing operations.
Naidoo said he believed creditors could not hope to receive more than about 20c to 30c on the rand . “I am not optimistic that we will recover a huge amount,” he told MPs.
“Our advice to anyone who wants to save the bank or provide similar services in the region is to use any financial resources that they have to apply for a new banking licence,” which would be cheaper and “avoid the system and legacy problems associated with the old VBS”, Naidoo said.
Ramaphosa said on Tuesday that the specific VBS model of providing affordable and accessible banking services to poor communities should be revived.
“I am one of those who have a great deal of affection and loyalty to VBS,” he said. “It operated where my parents grew up.”
Unhappy: EFF MP Mbuyiseni Ndlozi on Wednesday accused the Reserve Bank of being hell-bent on killing VBS. /