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National Treasury has lashed out at the Viceroy Research report on Capitec bank, calling it “reckless” and saying that it is “clear proof that [Viceroy] is not acting in the public interest nor in the interest of financial stability in South Africa”.
In a hard-hitting statement released today, Treasury rubbished the report which claimed that Capitec is “a loan shark with massively understated defaults masquerading as a community microfinance provider” and that the bank’s “own financial health seems to teeter on insolvency”.
The three-person group recommended that the South African Reserve Bank (SARB) place Capitec under curatorship because it is at risk of insolvency. However, the SARB issued a statement on Tuesday saying that Capitec is solvent, well capitalised and has adequate liquidity.
Treasury agreed with this assessment and called on the Financial Services Board (FSB), an independent regulatory agency in the financial services industry, to investigate Viceroy for market abuse.
It also called upon the FSB to work with regulatory boards in the United States and the United Kingdom “to consider whether Viceroy is regulated appropriately, and to consider whether it has transgressed any of their market conduct and market abuse laws that aim to protect investors”.
Capitec’s share price fell as much as 20% when news broke about the report with many questioning Viceroy’s intentions.
“Viceroy is not regulated in South Africa, and by its own admission, has been trading (short selling) in Capitec shares ahead of the release of its report, and stood to benefit substantially from forcing the Capitec share price to fall by publishing its speculative report about the bank,” the Treasury statement said.
The share price strengthened on Tuesday afternoon to end the day 2.96% weaker. This was mostly due to Capitec responding to the report by saying that it contained factual inaccuracies and that Viceroy did not understand the bank’s business.
Capitec also made it clear that “none of [Viceroy’s] allegations had been discussed, tested or verified with management”.
Viceroy made a name for itself during the Steinhoff saga when it released a report into the alleged financial irregularities at the international retail holding company.
Treasury also assured clients of Capitec that the funds of depositers were safe and that there is no reason why the bank should be put under curatorship.
