PARLIAMENT, March 20 – Members of Parliament’s standing committee on finance on Tuesday said they were not convinced by assurances that allegations against Capitec are unfounded and called for a proper investigation to protect the bank’s clients.
The committee received a briefing from, among others, the South African Reserve Bank’s (Sarb’s) registrar of banks Kuben Naidoo. He said allegations of questionable loan practices made against the bank by United States short seller Viceroy, including that it artificially rescheduled loans, had been found not to be correct.
“In our opinion the key allegations are not correct, Capitec is well regulated and they have adequate capital,” Naidoo said, noting that the bank had a good cost-to-income ratio of 34 percent.
Viceroy has deemed Capitec “uninvestable” and called for it to be placed under curatorship. The bank’s CEO Gerrie Fourie hit back at Viceroy by challenging its research practices and accusing it of engaging with the bank through the media, instead of directly.
“They are playing the media game. We have asked them to engage with us,” he said.
“On a regular basis, the regulators are going through our numbers so we are quite convinced we have nothing to hide.”
The Economic Freedom Fighters (EFF) have accused the Sarb of going easy on Capitec and rushing to place VSB Mutual Bank under curatorship.
But Naidoo said the bank had failed because its management had repeatedly failed to heed the Reserve Bank’s advice. It had told VSB in August last year to seek alternative liquidity contingency plans in the event of total municipality deposit outflow.
“Banks succeed or fail because of their own strategic decisions,” he said.
“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 added that the Sarb was “not happy that this bank has failed”.
EFF deputy leader Floyd Shivambu said he refused to accept assurances that Capitec’s lending practices were sound and alleged that it included extending loans to the poor in mining communities without any proper verification process or explanation of the loan conditions, and giving one individual multiple loans.
He reiterated the claim that the bank’s fortunes were insulated by the wealth of its owners.
“Capitec are loansharks… The Viceroy report is not incorrect… I’m not sure at all that Capitec should continue to exist under the current system and practices.”
The Democratic Alliance’s deputy finance spokesman Alf Lees raised concerns that the profits on Capitec’s loan book were disproportionate and said its CEO should have spoken to the substance of the bank’s operations instead of trying to discredit Viceroy.
The Inkatha Freedom Party’s Mkhuleko Hlengwa agreed and said there must a deep analysis of Capitec to protect its clients, who were often poor and black.