BANK REGULATOR PLACED UNDER SCRUTINY
Impartiality of the Prudential Authority at the Reserve Bank questioned after its advise to acquiring parties
roy.cokayne@inl.co.za THE IMPARTIALITY of the Prudential Authority at the Reserve Bank has been placed in question after it advised the acquiring parties of the SA Bank of Athens that including the Public Investment Corporation (PIC) as part of the acquiring group would increase its prospects of obtaining its approval for the transaction.
However, the Prudential Authority, the regulator of the banking industry, said: “We can categorically state that these allegations of ‘match-making’ or requiring applicants, including those related to the acquisition of SA Bank of Athens shareholding, to include the PIC as a party to the acquisition of shareholding of banks, are not true.”
The tribunal in August last year unconditionally approved the acquisition of the SA Bank of Athens by GroCapital Holdings, which was then jointly controlled by investment holding company Afgri Holdings and Toronto Stock Exchange-listed Fairfax Africa Investment.
The tribunal again considered and approved, with conditions, the transaction earlier this month after the PIC became a 35 percent shareholder in GroCapital Holdings.
Andries le Grange, the legal representative for the PIC and GroCapital, confirmed at the hearing that “the Reserve Bank required (the) PIC to come into the structure”.
Billy Mabatamela, appearing for the Competition Commission, said that after the approval of GroCapital’s acquisition of the bank, the commission received a letter from the merging parties indicating that they were advised by the Reserve Bank that including the PIC as part of GroCapital, the acquiring group, would increase their prospects of obtaining the Reserve Bank’s approval for the transaction.
“Based on that particular advice, the merging parties basically invited the PIC to be part of GroCapital. The PIC is currently in the process of acquiring a 35 percent shareholding, which will make it a joint controller of GroCapital.
“The re-notification of the proposed transaction is mainly because of the introduction of the PIC as part of the joint controlling parties in GroCapital,” he said.
Le Grange confirmed at the hearing that the transaction had been approved by the Reserve Bank and the Minister of Finance.
Norman Manoim, chairperson of the tribunal panel, asked if it was a legal requirement from the regulator, the Reserve Bank, that the PIC be a shareholder.
A Ms Simpson, who appeared together with Le Grange, said: “It was a suggestion, but the approval has been granted on the basis that they are a shareholder.”
Herkie Bloem from Afgri added that it was not a specific regulatory requirement by the Reserve Bank, but it strongly recommended they include the PIC as a shareholder.
Andiswa Ndoni, a member of the tribunal panel, asked Bloem if he believed the transaction would have been approved if they had not given equity to the PIC.
Bloem said he believed the transaction would still have been approved, because “Fairfax is definitely a shareholder of substance”.
Cas Coovadia, the managing director of the Banking Association, said he was unable to comment on the transaction, because he had absolutely no details about it.
However, Coovadia said their experience of this regulator is that it was “an excellent regulator and had always been even-handed and impartial”.