Nedbank stands by its actions

Nedbank says it fulfilled its regulatory and reporting obligations in assessing the risks of being the Bank of Baroda’s clearing bank and in acting as a counterparty to the interest rate swap transaction involving Transnet and Regiments.

Nedbank says that the Bank of Baroda, as a regulated entity in the South African banking system, was responsible for its own clients.

Neil McCarthy, head of corporate investment banking risk, said it would not have been appropriate to cut ties with Baroda based on their view of the reputational risk of directly banking Gupta entities.

Gerda Ferreira, head of forensics, said Nedbank had “erred on the side of caution, used our knowledge, in general, to identify transactions and still reported them”.

Referring to Transnet, Brian Kennedy, managing executive of the corporate investment banking division, said there was nothing untoward about it doing a swap with a corporate or state-owned entity or for them to use advisers.

“You need to have credit appetite and credit limits that go up to 15 years and maybe not every bank would have had the credit appetite to do a 15-year swap with Transnet because if there are any issues that Transnet can’t pay then you are left with counterparty risk.”

In November 2017, there was a review of the transactions, which benchmarked them against other swaps with other entities and found that their pricing was appropriate. “In addition, all trades were approved by the Transnet CFO.” —