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Although the South African Reserve Bank has not said anything publicly, its decision early this week to pay VBS retail depositors through Nedbank was the clearest of indications that the scandal-ridden bank is headed for liquidation.
The Reserve Bank’s appointment of Nedbank to inherit some 22 000 VBS retail clients lends credence to claims that the decision to liquidate VBS, the first black bank, was a foregone conclusion, predetermined by authorities as soon as they had decided to place VBS under curatorship.
The Shareholder Forum, a grouping representing more than 2000 VBS shareholders, is among those who claim that from day one, authorities were not interested in anything else other than liquidating VBS.
The forum’s argument is that primarily banks make a large proportion of their profits from taking deposits and then charge interest when clients source credit to open up businesses, take out personal loans, buy houses and cars and through every day transactions on ATMs.
However, VBS stopped granting loans and taking deposits the day the bank was placed under curatorship.
Effectively, this meant that other than from the home and vehicle loans which had already been granted, and importantly which clients were servicing, the bank was simply not able to generate new profits, throttling any prospects of potential future growth.
Further, the Shareholder Forum argues that the R330 million which the National Treasury had decided to pay out to VBS’ retail depositors – through Nedbank – could have been used to inject liquidity to VBS and capitalise South Africa’s first black-owned bank.
In an exclusive interview with City Press this week, the SA Reserve Bank’s deputy governor Kuben Naidoo said the decision was informed by considerations such as that under curatorship, authorities are able to guarantee money to retail depositors.
“But once a bank is liquidated, whatever money you are able to find must be shared between depositors, shareholders and creditors. If the curator decides to liquidate VBS, it simply means that shareholders and other corporate depositors will also benefit from the R330 million. But we don’t want that, the money is strictly for retail depositors.”
Naidoo added that VBS doesn’t have more than three branches in Limpopo.
This would have created more queues for retail depositors, who are already jittery.
A BLACK BANK IS A NECESSITY
In a country where banks, insurance companies and asset managers are exclusively under the monopoly of white firms, Naidoo said a bank and other financial services companies owned by black people – and Africans in particular – were non-negotiable.
However, he emphasised that the presence of black people in the financial services sector would not be at all costs.
The central bank, he said, was patient with VBS’ executives at all times.
By the end of February this year, VBS had failed to honour payments due to other banks as a result of the mutual bank’s clients transferring or depositing money to people who held accounts at other banks, at least four times, said Naidoo.
“The worst was when they failed to honour R300 million due to Rand Merchant Bank (RMB) after they had ordered government bonds. RMB could have liquidated them right there and there. Immediately after that event, we called a meeting with them and we told them to give us a plan in three days to improve their liquidity.
“After three days they told us that the Public Investment Corporation (PIC), which has a 350% stake in VBS, was willing to help. They also told us that the bank’s main shareholders, Vele Investments, were willing to inject cash.”
On March 8, three days before the central bank placed VBS under curatorship, Naidoo said the mutual bank’s bosses pleaded with the Reserve Bank for a few more days.
“The following day they leaked a letter to the media about the pending curatorship, claiming we did not want a black bank. We were left with no option but to place VBS on curatorship that Sunday. Had we not, (former VBS chairperson) Tshifhiwa Matodzi’s emotive letter would have caused a run on the bank the following day, which was Monday. The likelihood is that we would have placed them under curatorship anyway, but it would not have happened that Sunday.”
In the letter, Matodzi said it was clear that their “greatest sins” had been to give Zuma a loan and running a successful black bank.
Minutes of a meeting between the Reserve Bank and VBS, held on March 8, reveal that Anoosh Rooplal – who was appointed as the curator three days later – had attended the meeting.
The Shareholder Forum claims that Rooplal’s attendance of that meeting, three days before the announcement of the curatorship, is proof that while meetings to address the VBS’ liquidity crisis were under way, the reserve bank had long decided to place the bank under curatorship.
Naidoo dismissed the claim, arguing that the central bank started engaging SizweNtsalubaGobodo (SNG) – Rooplal’s employers – about the pending curatorship towards the end of February.
“Towards the end of February we had also informed VBS that if they don’t sort out their liquidity issues, we will have no option but to place them under curatorship.
“I don’t know Anoosh from a bar of soap. I saw him for the first time the Thursday before we announced the curatorship. In fact, we also did not appoint Anoosh as the curator. We appointed SizweNtsalubaGobodo and the company appointed Anoosh,” said Naidoo.
It doesn’t help the Reserve Bank’s cause that this journalist knew three weeks in advance that VBS would be placed under curatorship and that Rooplal would be appointed.
Rooplal's name wasn't known at the time and I had been told that a man of Indian descent would be appointed.
Read: VBS Bank at risk of going bust
Naidoo said the central bank wanted to save VBS, but the fraud and corruption which took place at the bank made it difficult.
“When we placed them under curatorship, we wanted to remove the shareholders and directors and bring in other black shareholders and executives. And the only way to do that legally is to appoint a curator. Unfortunately, what we found inside VBS was worse than what we thought,” Naidoo said.
CLAMOUR FOR VBS’ BANKING LICENCE
When the Reserve Bank placed VBS under curatorship in March, it was because of a liquidity crisis caused by the bank’s unsustainable business model of taking short-term municipal deposits and loaning them out on a long-term basis.
But as soon as Rooplal got going, he was confronted by a complex web of fraud, corruption and brazen theft in which the bank’s executives had been dipping their hands in depositors’ monies.
The blame for the collapse of VBS should be laid at the doors of the bank’s executives, and they should be tried for their vast economic crimes.
Rumours and gossip that VBS would be liquidated and its licence snapped up by politically connected businesspeople have been doing the rounds since the bank was placed under curatorship in March.
Rooplal’s decision to stop the bank from doing business, the Reserve Bank’s move to pay VBS retail depositors through Nedbank and the PIC’s inexplicable failure to lend the bank R1.5 billion to improve liquidity fuel the rumours that VBS is heading for liquidation.
All these also feed into the rumour in the corridors of power that a band of powerful politicians, PIC executives who will soon leave the entity, including companies comprising the youth, women and unions are standing by to grab VBS’ licence.
VBS’ licence is lucrative because the Reserve Bank has said that it should be converted into a commercial bank.
Whoever is able to grab it will have the licence to print money.
Businesspeople close to the saga have also suggested that as soon as VBS’ weaknesses were exposed, other banks worked overtime to throttle it, fearing competition.
One businessperson said the other banks feared that government would take all its business to VBS, a black bank.
North West ANC chairperson Supra Mahumapelo had already voiced his intention to give the province’s banking business to VBS.
At that time Treasury had shot down the idea, arguing that VBS was not ready to handle accounts as big as those of provinces.
Just before the bank crashed, its executives were working around the clock to finalise a deal in which VBS would take over the distribution of the multi-billion rand National Student Financial Aid Scheme.
With all of the above in mind, it is understandable why VBS would have been such a threat to the establishment.
