Regulators set to face probe after VBS saga
THE mess uncovered in the finances of VBS Mutual Bank by its curator is to be probed by an independent commission of inquiry, which will also look into the role the regulators played in their supervision of the bank.
Reserve Bank deputy governor Kuben Naidoo and Treasury deputy director-general Ismail Momoniat in midweek agreed the commission should also probe the role of the regulators in the saga.
“The commission will look at whether the regulator was asleep at the wheel,” Naidoo said. “It is a legitimate question to ask whether the regulator dropped the ball. We should have a commission of inquiry to see where we erred, where Treasury erred and whether the legal framework erred and whether there was fraud,” he said.
Naidoo, who is also the registrar of banks, reported that VBS lied to the Bank about the extent of its capital reserves.
He said the curator, Anoosh Rooplal, of SizweNtsalubaGobodo, would have to restate its financial statements – at least for the last financial year – because they did not reflect the true state of affairs of VBS. The curator had so far not been able to establish the veracity of the loans advanced by the bank.
The restatement would determine whether VBS could be salvaged.
“Given what we know following two months of curatorship and preliminary investigations, the probability of salvaging this bank is lower,” Naidoo said.
The bank apparently entered fake deposits in its system to enable it to make loans, in many cases to related parties. VBS reported to the Bank that it had a very high loan repayment rate, but Naidoo said that nine of its 20 large corporate loans were not performing, with no payments made for a long time.
Naidoo told MPs that VBS had failed to comply with the Bank’s capital adequacy requirements for banks and had submitted false statements about this.
“It was only on day one of the curatorship that we realised that there is nothing. Nothing. There is no capital. It is gone,” Naidoo said.
This was despite the monthly returns to the Bank that VBS was holding the required capital adequacy amount of R470-million.
DA finance spokesman David Maynier and EFF chief whip Floyd Shivambu welcomed a commission of inquiry but urged that it probe the role of the Treasury and the Bank, which they said had failed to act expeditiously in addressing the problems at VBS once these had come to their attention.
Naidoo told members of parliament’s finance committee that Bank governor Lesetja Kganyago intended to establish a commission of inquiry to investigate, among other things, the fraud committed by VBS, which was placed under curatorship due to its liquidity problems.