Cape Town – The South African Reserve Bank (SARB) governor intends to appoint a commission to determine what went wrong at VBS Mutual Bank, a committee heard on Wednesday.
The standing committee on finance was briefed by regulators on the progress made since VBS was placed under curatorship.
SARB placed VBS in curatorship in March when it was found to be facing a liquidity crisis after municipalities withdrew their deposits, in line with the Municipal Finance Management Act.
SARB deputy governor Kuben Naidoo responded to a question by Democratic Alliance MP David Maynier about whether a commission would be appointed, as was done to get to the bottom of the collapse of African Bank.
Naidoo said that there are two sides to the story. The first is that the regulators have found VBS not forthcoming in giving truthful information, and secondly it appears that the regulators should have known that there were issues at the bank.
For this reason, a commission is required to determine if the regulators were “asleep on the job”, he said, adding that the public can legitimately ask if the regulator “dropped the ball”.
“We should have a commission of inquiry to see where we erred, to see where Treasury erred, to see where the legal framework erred.”
Naidoo explained that the SARB first became aware that VBS was in trouble 18 months ago. On September 5, 2017, the board and management of the bank were called to develop a liquidity plan and to reduce their reliance on municipal deposits and solve liquidity for the longer term.
But since September 5 and the date of curatorship (March 11, 2018) the bank increased the number of deposits it took, which went up from R1bn to R1.5bn. “Again the bank lied to us."
When the Reserve Bank first discovered the significant reliance on municipal deposits, the matter was raised with the bank; the SARB itself was not sure if it was permissible.
The bank obtained a legal opinion saying it was legal, but then Treasury confirmed that it was not legal in terms of the Municipal Financial Management Act, Naidoo recalled.
When Treasury issued the circular telling the bank to desist from taking deposits from municipalities, VBS took Treasury to court, Treasury deputy director general Ismail Momoniat confirmed.
Momoniat said Treasury supports a commission of inquiry and added that the commission should look at broader issues as well.
“Regulators are not like God, they are not going to know everything. There are some things they should have known but at the end of the day the primary people responsible must be held to account,” said Momoniat.
On the other hand, VBS acted as if it was “politically untouchable” because it had protection, he said.
“They related to us with an arrogance I could believe… maybe because of who they loaned to,” Momoniat suggested. VBS is known for granting former president Jacob Zuma a loan to finance his Nkandla homestead.
Apart from the ruling party, Momoniat said other MPs are lobbying to stop the curatorship.
“I am happy to admit, there were weakness in system, otherwise there would not have been a problem. But (the commission) must look at the role of political pressure, which came from different points.”
Momoniat said there may have been good intentions behind MPs' actions, but it limits how agile or quickly one can act to address matters.
Economic Freedom Fighters MP Floyd Shivambu in turn stressed that the Treasury should be held to account for what has happened at VBS.
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