Sarb guarantees R336 million in VBS deposits

The South African Reserve Bank (Sarb), with the backing of National Treasury, has guaranteed more than R300 million in retail deposits at VBS Mutual Bank.

The central bank last week increased the value of funds guaranteed for retail depositors from R50 000 to R100 000. The guarantee for individual depositors, funeral schemes, burial societies, savings clubs and stokvels was secured from National Treasury.  

At R100 000 per depositor, Sarb has now guaranteed around R336 million in deposits. Total retail deposits with the bank are estimated to be around R370 million, meaning that 97% of the bank’s 22 700 retail depositors will receive all their money, according to Sarb deputy governor Kuben Naidoo.

Sarb governor Lesetja Kganyago on Monday outlined an agreement reached with Nedbank to facilitate the payment of depositors’ monies. From Friday July 13, Nedbank will open accounts for retail depositors and load them with a balance equivalent to the amount of the guaranteed deposit. Retail depositors will then be able to withdraw up to R100 000 of their funds at Nedbank branches or ATMs – retail depositors have three years to claim their deposits.

Nedbank was selected on the basis of fees charged, the proximity of its branches in relation to branches of VBS, and products comparable to those offered by VBS. Nedbank chief executive Mike Brown said the bank would up its staff and working hours in proximity to VBS branches in Limpopo as well as dispatch four mobile branches to the area and hold town hall meetings to engage with VBS depositors. He told Moneyweb that Nedbank would not charge for the assistance it was asked to provide in the matter. “Nedbank hopes the vast majority of VBS retail depositors retain their new Nedbank accounts and remain as satisfied customers of Nedbank into the future.”

To date, no guarantees have been provided for the funds deposited by municipalities, large businesses and corporates, all of whom will retain their deposits in VBS. The bank had over R1.5 billion in municipal deposits when placed under curatorship despite it being illegal for municipalities to make deposits into mutual banks, which are not registered in terms of the Banks Act rendering. “Municipalities had no business placing deposits with a mutual bank,” said Kganyago. “They knew they were breaking the law. They did it anyway.”

VBS Mutual Bank was placed under curatorship in March this year amid a liquidity crunch. Court documents – based on information uncovered during a forensic investigation – have since revealed that the bank was looted by its own management, whose fraudulent schemes cost the bank around R1.5 billion.

On Friday, curator SizweNtsalubaGobodo Advisory Services – represented by Anoosh Rooplal – instituted a High Court application for the liquidation of VBS shareholder Vele Investments. Further applications were brought against five VBS executives for the sequestration of their estates.

The curator is seeking to recover R1.5 billion in assets owned by VBS and will restate the bank’s financial statements for 2017. Prior years’ statements may also be restated if deemed necessary. Rooplal said the fraud uncovered during the forensic investigation had complicated the curatorship and cast doubts about the survival of the bank. “The wide-scale fraud that has been perpetuated against the bank has certainly derailed the curation process. I think one needs to understand that when we commenced curatorship duties, the issue at hand was a pure liquidity, but now that has morphed into something much more with the fraud aspects. By virtue of that we are not as confident as initially, when we first stepped in,” Rooplal said.

Naidoo said the success or failure of the bank would not determine whether the Treasury-backed guarantee would be called upon, but rather whether sufficient assets can be collected to repay Treasury. “Our view, at this stage, is that there are sufficient quality assets to be able to recover the R336 million for the guarantee.”

All loan contracts remain valid and enforceable, and customers are required to continue paying monthly instalments agreed upon.

WATCH: South African Reserve Bank governor Lesetja Kganyago responds to a journalist who asked how fraud at VBS Mutual Bank was carried out under the central bank’s watch.

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