Ubank placed under curatorship, Sarb confirms

Ubank – the small retail lender which largely caters for mineworkers – has been placed under curatorship, South African Reserve Bank (Sarb) Governor Lesetja Kganyago confirmed on Monday.

He said the move by Sarb’s Prudential Authority is aimed at protecting the bank’s depositors, after the Ubank’s capital adequacy ratio had fallen to around just 3%. Ideally, Sarb prefers a total capital adequacy ratio for banks around 10%.

Kganyago announced that KPMG has been appointed curator of the bank, which has total assets of just over R5.2 billion.

Ubank is a 100% black-owned South African bank, according to its website.

Read: Union against sale of bank stake to Guptas

It is linked to mining sector unions and most of its clients are either mining workers or people from underserviced communities.

“Ubank is a bank, duly registered as such in terms of the provisions of the Banks Act 94 of 1990, which means that it falls under the supervisory and regulatory ambit of the Prudential Authority,” Kganyago said.

“The bank has a long history of providing basic financial services to mine workers and their families. The Financial Sector Regulation Act 9 of 2017 mandates the Prudential Authority to [A] promote and enhance the safety and soundness of financial institutions that provide financial products; and [B] protect financial customers against the risk that that those financial institutions may fail to meet their obligations,” he added.

“During the last couple of years, the Prudential Authority has intensified its supervision of Ubank due to corporate governance concerns, a high number of internal control weaknesses, and the prolonged period it has taken to secure the injection of sufficient capital,” noted Kganyago.

He said the injection of new capital was needed for Ubank to comply with the minimum capital requirements, to diversify the bank’s business model and to ensure the future sustainability of the bank.

Curatorship

“After having duly considered the seriousness of the issues facing the bank, and given that Ubank is unlikely to immediately meet its obligations as required by the Banks Act and the regulations relating to banks, the Minister of Finance, in consultation with the Prudential Authority, has decided to place Ubank under curatorship with immediate effect.”

“This is being done to proactively mitigate the adverse consequences on Ubank’s depositors, and to preserve the stability of the South African banking and financial services sector as a whole,” he added.