VBS board chair Matodzi resigns after bank placed under curatorship

VBS board chair Matodzi resigns after bank placed under curatorship

Officials at VBS Mutual Bank could not immediately be reached for comment.

Last year, the National Treasury instructed municipalities to stop sending deposits to the bank due to a stipulation in the Municipal Finance Management Act that requires that they must deposit their money only with a fully registered bank. As a result, several councils withdrew more than R1-billion in deposits.

Mutual banks in South Africa do not offer the full range of services that commercial banks do and the governor said municipalities were not allowed to make deposits with such entities in the first place. "After an exhaustive process of engaging with the board, management and shareholders, there was no other solution besides curatorship", he told journalists. "The Financial Services Board has indicated that there are other related parties that may be impacted by the curatorship", said Treasury.

The City Press newspaper reported on Sunday that the bank is expected to be placed under curatorship this week by the SARB.

"The Treasury and Reserve Bank conduct goes against radical economic transformation and must be condemned since it deviates from the objectives of transformation as articulated by 54th Congress to change the institutions and policies and laws in order to advance transformation", it said in a statement.

"The curator is given the legal means to create the necessary mechanisms to implement a resolution plan which will ensure the long-run sustainability of VBS".

Treasury explained that restricting municipalities from investing in mutual banks is consistent with ensuring municipal funds are managed responsibly.

Kganyago said it was highly risky for the bank to take sizeable municipal deposits that were short-term and lend them out long-term. This would ultimately lead to liquidity problems.

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"In the past few weeks, National Treasury and the Reserve Bank have been working closely to try and save the bank so as to protect ordinary depositors", Treasury said.

In a statement issued on Monday the PIC, which has a 27% shareholding in VBS, said it has noted the South African Reserve Bank's (SARB's) decision to place the bank under curatorship given its liquidity crisis. Kganyago dismissed rumours that the bank was being punished because it was black-owned, saying all banks were equally monitored.

"The colour of money is red, it is green, yellow, it's blue".

"In the end, we were faced with a well-organised and powerful system, which does not tolerate growing black banks and black excellence", he said.

Following the briefing on Sunday, Treasury issued a statement indicating that curatorship is a better option than liquidation. Placing a bank under curatorship is a reflection of poor bank supervision on the part of the Reserve Bank, and also an act that will prohibit black people's participation in the ownership and control of financial services institutions.

"National Treasury's actions are trying to balance the need for a more diversified small banking sector against the need for well-run and well-governed municipalities".

VBS came into prominence in 2016 when it loaned former president Jacob Zuma R7.8 million to repay the state for the cost of non-security upgrades to his rural homestead in Nkandla, KwaZulu-Natal.

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