Re­serve Bank re­veals da­m­age of ut­ter­ances

The Star Early Edition - - COMPANIES - Ka­belo Khu­malo

THE SOUTH African Re­serve Bank (Sarb) yes­ter­day laid bare the da­m­age done to the econ­omy by the re­me­dial ac­tion ad­vanced by Public Pro­tec­tor Bu­sisiwe Mkhwe­bane last week in her re­port into the bailout to Bankorp more than 20 years ago, point­ing that Absa and Stan­dard Bank took the most hit among JSE listed bank­ing groups.

The cen­tral bank, in its ur­gent ap­pli­ca­tion filed with the High Court in Pre­to­ria, de­tailed how Mkhwe­bane’s ac­tions had “dam­ag­ing and im­me­di­ate con­se­quences for the coun­try in terms of in­vestor con­fi­dence.”

In an af­fi­davit de­posed with the High Court, Re­serve Bank gover­nor Le­setja Kganyago said that the rand had de­pre­ci­ated by 2.05 per­cent from R12.79 against the green­back in the wake of Mkhwe­bane’s ut­ter­ances.

Kganyago fur­ther charged that R1.3 bil­lion worth of South African bonds were sold by non­res­i­dents on the day, with the day’s net sales ranking amongst the big­gest over the last three months.

He said bank­ing shares suf­fered most as re­sult of Mkhwe­bane’s rec­om­men­da­tions. “They were among the worst per­form­ing sec­tors on the day with sales es­ti­mated at R365 mil­lion. Absa and Stan­dard Bank ac­counted for 75 per­cent of the net sale amount,” Kganyago said.

Mkhwe­bane caused a stir last week when she, as part of her re­me­dial ac­tions, said that the Re­serve Bank had failed in its du­ties to pro­tect the public by not en­sur­ing that Absa bank re­paid an apartheid-era bailout given to Bankorp.

She fur­ther said that the cen­tral bank’s mone­tary pol­icy should change and that it should no longer fo­cus on pro­tect­ing the value of the cur­rency. Rat­ing agency Stan­dard and Poor’s quickly is­sued a warn­ing that the coun­try’s rat­ing could be cut deeper into junk ter­ri­tory if gov­ern­ment med­dles with the “crit­i­cal” in­de­pen­dence of the coun­try’s cen­tral bank.

The rat­ing agency to­gether with Fitch and Moody’s had ear­lier in the year stripped the coun­try of the cov­eted in­vest­ment grade rat­ing after the sack­ing of then fi­nance min­is­ter Pravin Gord­han.

Kganyago at­tached a let­ter from S&P’s to the Re­serve Bank as part of his af­fi­davit, in which the rat­ing agency sought im­me­di­ate au­di­ence with him to dis­cuss what steps the bourse planned to take on the re­me­dial ac­tion pro­posed by the Public Pro­tec­tors.

Time frames

He said S&P’s also wanted clear time frames on what would be done to rem­edy the sit­u­a­tion.

Kganyago pleaded with the court to set the re­me­dial ac­tion of the Public Pro­tec­tors aside so as to safe­guard the well­be­ing of the econ­omy.

He fur­ther charged that the cen­tral bank was well placed to deal with fi­nan­cial in­sti­tu­tions in dis­tress, like it did in the Bankorp mat­ter.

“The Sarb cur­rent prin­ci­ples re­lat­ing to dis­tressed banks and re­form in re­lated ar­eas of fi­nan­cial ar­chi­tec­tures were com­pa­ra­ble to the high­est in­ter­na­tional stan­dards.”

In 2014, the cen­tral bank had bailed out African Bank with a multi-bil­lion rand cash in­jec­tion.

Mkhwe­bane’s re­port now faces le­gal chal­lenge on many fronts, with Absa also has in­di­cated its in­ten­tion to seek ju­di­cial re­lief on the con­tents of the re­port.

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