Reserve Bank denies probe into Capitec’s loan origination fees

The South African Reserve Bank (Sarb) has refuted a Bloomberg News report alleging that it requested an investigation into loan origination fees charged by Capitec Bank.

Shares in Capitec fell more than 5% during intraday trade, after the news report alleging that the Sarb had written to the National Credit Regulator (NCR) to request a probe into the origination fees charged by Capitec on its multi-loan product. According to the news report, the probe was spurred by reports by short-seller Viceroy Research.

“In its update to Parliament on 30 May 2018, the Sarb reported that there are three main allegations in the Viceroy report. The first two allegations deal with scheduled loans and the provisioning models, both of which are prudential matters, while the third issue deals with the continued use of multi-loan products. This third issue is a market conduct issue and falls within the responsibilities of the NCR. The Sarb met with the NCR and requested that the regulator take the matter forward,” the Sarb said in a statement late Tuesday.

The multi-loan product was the subject of legal dispute between Capitec and consumer advocacy group Summit Financial Partners, which alleged that the product was in contravention of the country’s credit laws. The parties recently reached an out of court settlement while a previous NCR investigation cleared the product.

According to Viceroy Research, the legal dispute could have been used to trigger a multi-party litigation refund for which it believed the bank would be required to refund related origination fees to the tune of at least R12.7 billion. The bank has on several occasions repudiated Viceroy’s claims and even published its own analyses of the reports, pointing out flaws in the short-sellers’ logic and methodology.

Capitec has strongly denied the basis of Bloomberg’s report.

“Capitec Bank has taken note of the blatant, misleading and untruthful media commentary by Bloomberg News service … We have no knowledge of the investigation Bloomberg refers to and are in close and regular contact with Sarb and the NCR.”

Capitec, in a separate statement, announced that ratings agency S&P Global raised its long-term credit rating to ‘zaAA’ from ‘zaAA-’ following a “revision  of its criteria on national scale ratings and subsequent recalibration of the mapping table for South Africa”.

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