699 reasons why banks haven’t learnt

WHAT is it about their involvement in the “Buy a New Car for R699” scheme that Nedbank and Standard Bank are trying so desperately to hide?

After global banks such as Citigroup and Goldman Sachs sparked a financial crisis by duping investors into buying dressed-up subprime mortgages, you’d think banks would be aware of the transparency imperative. You’d think their investors would demand it. Well, not these two local banks. Asked two simple questions this week — how many of their clients used Albert Venter’s dubious R699 scheme, and what their exposure was — those banks clammed up.

Such a petrified silence rings all sorts of alarm bells.

After all, wasn’t Venter’s R699 plan just a dubious fly-by-night car finance scheme with a few thousand clients? Surely it’s not like there’s a wider systemic failure?

If so, why then are Nedbank and Standard Bank gritting their teeth and refusing to say how badly they were hurt by the R699 collapse?

When this newspaper asked him, Standard Bank’s Steven Barker said: “There’s a whole bunch of things going on, and I’m not going to disclose the current number of clients and our exposure.”

But does a bank not have a duty to be transparent about this sort of problem in its vehicle loan book?

Barker responded: “We’ve considered that and we’re happy with where we are until that changes.” Nedbank was equally skittish. “Those numbers are sub judice,” said Nedbank’s Trevor Browse.

Come now, Mr Browse, it’s not as if the bank would compromise any court case were it to reveal how many of the R699 clients it lent to.

Could it be, perhaps, that those numbers are actually rather embarrassing for Nedbank?

Isn’t the real problem that the bank’s risk-management processes skipped a beat when it came to assessing if these customers really could afford these loans?

After all, if people can only afford to repay their car loan because they’re getting a sketchy “rebate” from an unknown company in Hong Kong for advertising the scheme itself, was it wise to give them loans in the first place?

Especially considering most of these customers earned between R6 000 and R10 000 a month.

Until this week, Absa has also been playing coy. But to its credit, Maria Ramos’s bank has now revealed that 6 511 of its clients bought cars through Satinsky.

Absa’s Arrie Rautenbach has confirmed the bank lent more than R700-million to Satinsky’s clients.

Though he was at pains to stress that most of these accounts are “in good standing”, the vast sums involved make you wonder if this is why Nedbank and Standard Bank are refusing to say a word.

What adds colour to this case is that FirstRand’s Wesbank refused to lend to Venter’s company Satinsky, which ran the R699 scheme.

Wesbank said Satinsky had an “unsustainable” business model which bore all the “historical traits of a true Ponzi scheme”.

Had all four lenders piled in, perhaps the banks could argue that no one could have seen through it. But Wesbank did see through it.

Now, by failing to be transparent, those two banks are inviting people to imagine the worst scenario.

Barker, surprisingly, agrees. “I understand there’s a risk that people will think this is much bigger in Standard Bank’s life, but we’re happy with that,” he said.

There’s a greater reason for the banks to be transparent though.

Last week, the New York Times reported a 130% boom in “subprime” vehicle loans in the US since 2008, as banks found ever more inventive ways of lending to people who can’t afford cars.

“[They] take advantage of the most desperate, least financially sophisticated customers. The surge in lending and the lack of caution resemble the frenzied subprime mortgage market,” it reported.

Is there a similar risk in South Africa? Who’s to say, when our banks remain tight-lipped.

It’s not small change either. If Satinsky’s 29 000 customers bought cars for, say, R150 000 each, you’re talking R4.3-billion in loans.

Whatever the reason for the poor transparency — whether the banks are trying to throw a sheet over a train wreck, or simply because, even after the financial crisis, they still don’t understand the principle — it’s not a flattering picture.

What’s clear is that those banks, so eager to parrot cliches about “maximum transparency”, are now doing exactly the opposite.