Sleeping dog cocks an ear

Ahead of its collapse in 2014, African Bank was receiving 60 to 80 complaints of reckless lending a month. Most were lodged by debt counsellors on behalf of their overindebted clients.

Now the DA’s Geordin HillLewis wants the National Credit Regulator to track down these reckless loans and ensure they are written off as required by the National Credit Act.

He says that of the R17.5bn of loans from the “bad bank” (now called Residual Debt Servies), about 10% were reckless and should never have been extended to African Bank customers.

Hill-Lewis doesn’t seem daunted by the huge challenge. The regulators, in this case the SA Reserve Bank and the NCR, will not be rushing to help him. The NCR never rushes to do anything and the Reserve Bank prefers to sort out messy threats to the integrity of the banking system on its own terms.

After almost two years of critical intervention the dust is finally settling on the African Bank collapse, and doing anything that might shake it up again or put it back in the spotlight will likely be discouraged.

Hill-Lewis’s proposal will be particularly difficult for the Reserve Bank to swallow, given its determination from the start that there would be no mercy for borrowers.

“Collections against the bad book will be continued and indeed strengthened: there is no payment holiday for anyone owing on a loan from African Bank,” warned then Reserve Bank governor Gill Marcus back in August 2014.

Not only would a write-off of reckless loans threaten the Reserve Bank’s collateral, there’s the possibility many people with reckless loans may also have “good” loans in the good bank. Having one loan written off could discourage repayment of the other.

Formally, the Reserve Bank is doing what bureaucrats like to do — passing responsibility to another set of bureaucrats, in this case the NCR.

“The Reserve Bank is a prudential regulator. Investigations into reckless lending [are the responsibility of] the NCR. It is up to the NCR to decide whether to and how to pursue such matters,” said Bulelwa Boqwana, chief of staff at the Reserve Bank, in response to a request for comment on the DA’s bid to have the reckless loans investigated.

Hill-Lewis says Boqwana’s response doesn’t do justice to the extent of the Reserve Bank’s authority in the matter.

Its approval will be needed to gain access to Residual Debt Services’ credit agreements to determine the extent of reckless lending. These credit agreements are part of the collateral for the Reserve Bank’s R3.3bn loan to African Bank.

African Bank had about 3.3m credit agreements in August 2014 when the Reserve Bank stepped in. The authorities are not revealing how these have been allocated to the good and bad banks, but Hill-Lewis says a conservative assumption would be that credit agreements for 1m now lie with the “bad bank” (renamed Residual Debt Services when the good bank was relaunched and relisted as African Bank).

Trawling through 1m credit agreements for evidence of reckless lending would be a nightmare for the underresourced NCR.

Not that it is unfamiliar with African Bank and reckless lending. Several of the bank’s directors (including former CEO Leon Kirkinis) told the Myburgh commission that the February 2013 leaking of the NCR’s decision to refer a case of alleged reckless lending, and a proposed fine of R300m, to the consumer tri-