Solid laws require able regulators
DEAR SIR — Now that African Bank (Abil) has been placed under curatorship by the Reserve Bank, hopefully the ailing company can be resuscitated and many jobs saved.
Most important, we hope that valuable lessons have been learnt by the banking industry so as to prevent another similar debacle. Clearly, something has gone terribly awry with management at the bank. Management and state regulators should be investigated and, if necessary, held accountable. Abil’s substantial loan book was seemingly well protected by exorbitant interest rates and the imposition on all loans without collateral of expensive insurance, which was carried by borrowers.
One must query the competency of major Abil investors such as Coronation Group and the Public Investment Corporation, which have continued to plough sizable amounts of their shareholders’ capital into the problem child, despite longstanding misgivings by financial analysts.
No public company can require a cash injection of R8bn overnight to survive. Such a decline generally only occurs over a long period of time, and Reserve Bank Governor Gill Marcus (pictured) has said the Bank has been aware of the situation at Abil for about two years and has been in protracted discussions with Abil management over that period.
Why, then, did the Bank and even the National Credit Regulator not act timeously before the problem reached crisis proportions? Once again, it seems to be a case of SA having superb regulatory legislation of certain key industries, but actual regulation falls far short of what is necessary.
It is no use having well-crafted laws in place but incompetent state regulators. Abil’s internal and external auditors seem to have been particularly deficient.
There have been rumblings about highly irresponsible unsecured lending by certain South African banks. Also, there is arguably a case to be made for many recipients of questionable loans to take their case to court and have those loans written off on the basis of irresponsible lending by the bank, as prescribed in the National Credit Act. Such legal action would serve to teach the banking industry a severe and long-overdue lesson.
Please let it not now be business as usual, with taxpayers bearing the brunt of the bail-out for Abil’s socalled “bad book”. The government must ensure that regulators apply due diligence and professionally do the job they are tasked with. Bonsile Nongena Via e-mail