Placing the troubled Venda-based VBS Mutual Bank under curatorship should be a last resort in trying to assist it, the Economic Freedom Fighters said on Sunday, adding that the bank is being “victimised” because of a loan it gave to former president Jacob Zuma.
This comes as the South African Reserve Bank (SARB) is expected, later on Sunday, to clarify the liquidity status of VBS Mutual Bank and whether it will be put under curatorship.
City Press newspaper reported 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 EFF believes that placing a bank under curatorship should always be a last resort, something to be done after exhausting different rescue measures and interventions,” the party said in a statement.
“Opting for curatorship as the first measure undermines the bank and undermines black people’s participation in the ownership and control of financial services institutions.” The “victimisation” of the bank was wrong, because VBS was the only bank which had a plan to finance properties and mortgages in rural areas.
“The EFF is aware that VBS is being victimised due to a loan it gave to Mr Jacob Zuma for a house in Nkandla. Had it been a white-owned bank that had offered Zuma a loan, they would not be subject to victimisation today,” it said.
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 Venda King’s 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 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 licence 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)