VBS silent on municipal deposits in its reports to SARB

VBS Mutual Bank’s official monthly reports to the SA Reserve Bank (SARB) show the dramatic liquidity crisis it was already experiencing in January, as municipalities with R1 billion banked with it started pulling their money out.

VBS’s cash kept at other banks had already fallen from R569 million in December to a paltry R2 million at the end of January.

Data for February are not yet available, but if all municipal deposits have been withdrawn as required by Treasury, the bank would have had to find R785 million in cash somewhere. That is how much municipalities had deposited with VBS at the end of January.

VBS has been placed under curatorship due to its sudden insolvency. The bank has a mutual banking licence. This makes it illegal, in terms of the Municipal Financial Management Act, for municipalities to deposit their funds with VBS. Despite this, the bank’s entire growth over the past two years has been due to municipal deposits.

Oddly, VBS’s declarations to the SARB never reflected this until June last year. Up to then its deposits were all attributed to “households”. 

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