Johannesburg - The South African Reserve Bank said on Friday it has commissioned a forensic investigation into VBS Mutual Bank, nearly a month after placing the beleaguered bank under curatorship.
The process, to be conducted by SizweNtsalubaGobodo Advisory Services, will probe if any of VBS business was conducted “with the intent to defraud depositors or other creditors of the bank, or for any other fraudulent purpose”.
It would also investigate if VSB was involved in questionable and/or reckless business practices.
The initial findings of an assessment by the SARB's curator auditing firm SizweNtsalubaGobodo showed that VBS Mutual Bank was “severely mismanaged” and there was reason to believe there has been fraudulent reporting and manipulation of financial information.
This finding formed part of an affidavit filed by the central bank on March 29, relating to a court application initially launched by Vele Investments, the majority shareholder of VBS. The affidavit was lodged by deputy Reserve Bank governor Kuben Naidoo.
The Reserve Bank placed VBS under curatorship in early March because of the bank’s severe liquidity crisis. Vele Investments wanted to challenge the placing of the bank under curatorship in court as "unconstitutional", but dropped the case in mid-March on the advice of its board.
At the time the investment group said it would work alongside the SARB and other stakeholders such as Treasury and the Public Investment Corporation to support the curatorship.
SizweNtsalubaGobodo started its duties as curators on Monday March 12, led by director Anoosh Rooplal. Naidoo and other representatives from the SARB met with the Rooplal’s team on March 22 for an update on the curator's initial findings.
In SARB's affidavit published on Tuesday, Naidoo said when Rooplal commenced its curatorship duties, VBS had a cash liquid position of over R24m and “ostensibly” held deposits amounting to R2.9bn.
Naidoo said the figure of corporate deposits of R900m is yet to be confirmed.
“It is uncertain as to whether these corporate deposits represent ‘true’ deposits and Mr Rooplal has to date been unable to confirm the amounts in respect of all these deposits were actually received by VBS Mutual Bank,” Naidoo said in the affidavit.
The findings by the curator also show that VBS was paying brokerage commissions to entities to attract deposits, mainly from municipalities.
“This is highly unusual for banks,” Naidoo said.
“The liquid cash position would not enable VBS Mutual Bank to repay deposits as and when required.”
Based in rural Venda, in the Limpopo province, the once little know financial services provider shot to fame in 2016 after it was announced that it had granted former president Jacob Zuma a R7.8m loan for his Nkandla home.
Zuma had been ordered by the Public Protector to pay back a portion of the taxpayers money which was used for upgrades to his private residence. The cost of the controversial project had escalated to an estimated R250m.
Critics have alleged that VBS was been targeted by the authorities because of its Zuma loan.
VBS was established in 1982 and initially operated as Venda Building Society.