JOHANNESBURG, March 11 – The South African Reserve Bank (SARB) will on Sunday clarify the liquidity status of troubled Venda-based VBS Mutual Bank and whether it will be put under curatorship.
SARB governor Lesetja Kganyago and the Registrar of Banks Kuben Naidoo will update media on VBS Mutual Bank at the central bank’s headquarters in Pretoria on Sunday afternoon.
This comes after City Press newspaper reported on Sunday that VBS Mutual Bank faced the possibility of a spectacular crash after National Treasury’s instruction to municipalities to stop investing with the institution.
The newspaper said the order to municipalities was made early last year and stated that the Municipal Finance Management Act (MFMA) forbade municipalities from investing in mutual banks. This resulted in a number of councils withdrawing more than R1 billion from the bank, causing a serious liquidity crisis.
The bank’s cash reserves are reported to be so low that its executives said that if main shareholders, the Public Investment Corporation (PIC) and Dyambeu Investments, do not inject cash the SARB is expected to place the entity under curatorship this week.
The bank shot to prominence in 2016 when it lent former president Jacob Zuma R7.8 million to reimburse the state for the non-security upgrades made to his private homestead in Nkandla in KwaZulu-Natal.
Last year, the bank said it was preparing to apply for a full commercial banking license to continue its upward slide of accumulating assets and posting profits.
Established in 1982 and initially operated as Venda Building Society, VBS Mutual Bank received a permanent Mutual Bank License on October 11, 2000, and currently has about 30,000 clients with deposits of around R800 million.
– African News Agency (ANA)