SARB's Naidoo: We warned VBS on its reliance of huge depositors

Kuben Naidoo is the newest deputy governor of the Reserve Bank. (Supplied)
Kuben Naidoo is the newest deputy governor of the Reserve Bank. (Supplied)

Cape Town - In his presentation to the Standing Committee on Finance, South African Reserve Bank registrar Kuben Naidoo raised concerns including deficient compliance culture, weak asset and liability management, potentially illegal municipal depositions and poor quality in regulatory reports.

The Reserve Bank told the committee on Tuesday that VBS had been warned of the risk attached to municipal deposits that it allowed on more than one occasion but said these practices continued.

Last year National Treasury issued and instruction to municipalities to discontinue these deposits.

Naidoo said in September 2015 and September 2016 it warned VBS Mutual Bank against its practices where it related to the municipal deposits.

He said in spite of efforts to turn things around for VBS, the bank did the opposite.

“VBS was warned against reliance placed against the ten largest depositors, with municipalities the largest. VBS was alerted against the increasing sectorial concentration of municipalities and worsening liquidity mismatch positions,” Naidoo said.

The SARB said in August of 2017 VBS was advised to seek alternative liquidity contingency plans in the event of total municipality deposit outflow.

Naidoo said the bank failed because its management repeatedly failed to heed the Reserve Bank’s advice.

“Not only did they fail to heed our advice and reduce the risk that they were exposed to, they went in the opposite direction. We have asked them repeatedly to apply for a commercial banking license to allow them more scope than a mutual bank and to allow us more room for supervision,” he said.

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