Lesetja Kganyago, governor of South Africa's reserve bank says "severe liquidity crisis' led to the failing of VBS Mutual Bank after it was unable to repay money owed to municipalities. Luke MacGregor / Bloomberg
Lesetja Kganyago, governor of South Africa's reserve bank says "severe liquidity crisis' led to the failing of VBS Mutual Bank after it was unable to repay money owed to municipalities. Luke MacGregor / Bloomberg
Lesetja Kganyago, governor of South Africa's reserve bank says "severe liquidity crisis' led to the failing of VBS Mutual Bank after it was unable to repay money owed to municipalities. Luke MacGregor / Bloomberg
Lesetja Kganyago, governor of South Africa's reserve bank says "severe liquidity crisis' led to the failing of VBS Mutual Bank after it was unable to repay money owed to municipalities. Luke MacGregor

South African lender goes into administration amid 'liquidity crisis'


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VBS Mutual Bank, one of South Africa’s smallest lenders, has been put into administration after it was unable to repay money owed to municipalities, according to the country’s central bank.

The management team has been relieved of its duties and a curator from the auditing firm SizweNtsalubaGobodo put in place following a “severe liquidity crisis”, Lesetja Kganyago, governor of the South African Reserve Bank, told reporters. Retail depositors’ money is guaranteed and VBS will stay open, he said.

VBS has operated as a licensed mutual bank, funded by its members, for 25 years, according to its website. The lender, which isn’t listed, gained attention in 2016 when it gave former President Jacob Zuma a mortgage to settle a Constitutional Court order to repay taxpayers some of the money spent upgrading his private residence. The bank was fined 500,000 rand (Dh155,416) last year because of weaknesses in its control measures to prevent money laundering and combat the financing of terrorism.

“Eighteen months ago there was a significant increase in municipal deposits” at VBS, Kuben Naidoo, South Africa’s banking regulator, said in the same presentation. “It’s quite a risky strategy to take that money and lend it long term. When the municipalities came asking for that money, the bank wasn’t able to pay.”

The trigger that sent the bank into administration was its inability to honour an obligation to a municipality on February 16, Mr Naidoo said, without identifying the municipality. Although VBS was asked to develop a plan, it became clear that its major shareholders would not be able to provide the amount of money the bank needed within a short space of time, he said.

VBS operates six branches across the country and calls itself a black-owned specialist corporate finance and retail bank. VBS’s total assets were 2.4 billion rand at the end of December, according to the most recent central bank data. One of the biggest shareholders is the Public Investment Corporation, Africa’s largest fund manager.

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“We don’t see a solution to the liquidity problems other than the solution of curatorship,” Mr Naidoo said. “Small depositors with less than 50,000 rand should be able to access their money overnight. It’s quite likely that all depositors won’t be able to get their money immediately.”

South Africa’s National Treasury said it would engage with affected municipalities to determine the extent of their potential loss and ensure service delivery isn’t affected. Treasury worked closely with the central bank in the past few weeks to try and save VBS to protect ordinary depositors, it said in a statement.

“It is never the intention of Treasury for any bank to be liquidated, particularly a small black-owned bank,” it said. “National Treasury’s actions are trying to balance the need for a more diversified small banking sector against the need for well-run and well-governed municipalities.”

South Africa’s previous bank failure was in 2014, when African Bank Investments’s lending unit collapsed after bad debts soared and it wasn’t able to raise funding. African Bank is still operating after the central bank stepped in to rescue the viable assets.

South Africa’s gross domestic product expanded 1.3 per cent in 2017, showing economic growth for the first time in four years even as ongoing political instability hurt investor confidence. All four of South Africa’s biggest lenders reported profit growth in the second half of 2017 and the banks’ index has climbed 6.6 percent this year, reaching a record high on Tuesday.

Sole survivors
  • Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
  • George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
  • Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
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Under 19 Cricket World Cup, Asia Qualifier

Fixtures
Friday, April 12, Malaysia v UAE
Saturday, April 13, UAE v Nepal
Monday, April 15, UAE v Kuwait
Tuesday, April 16, UAE v Singapore
Thursday, April 18, UAE v Oman

UAE squad
Aryan Lakra (captain), Aaron Benjamin, Akasha Mohammed, Alishan Sharafu, Anand Kumar, Ansh Tandon, Ashwanth Valthapa, Karthik Meiyappan, Mohammed Faraazuddin, Rishab Mukherjee, Niel Lobo, Osama Hassan, Vritya Aravind, Wasi Shah

RESULTS

Time; race; prize; distance

4pm: Maiden; (D) Dh150,000; 1,200m
Winner: General Line, Xavier Ziani (jockey), Omar Daraj (trainer)

4.35pm: Maiden (T); Dh150,000; 1,600m
Winner: Travis County, Adrie de Vries, Ismail Mohammed

5.10pm: Handicap (D); Dh175,000; 1,200m
Winner: Scrutineer, Tadhg O’Shea, Ali Rashid Al Raihe

5.45pm: Maiden (D); Dh150,000; 1,600m
Winner: Yulong Warrior, Richard Mullen, Satish Seemar

6.20pm: Maiden (D); Dh150,000; 1,600m
Winner: Ejaaby, Jim Crowley, Doug Watson

6.55pm: Handicap (D); Dh160,000; 1,600m
Winner: Storyboard, Richard Mullen, Satish Seemar

7.30pm: Handicap (D); Dh150,000; 2,200m
Winner: Grand Dauphin, Gerald Mosse, Ahmed Al Shemaili

8.05pm: Handicap (T); Dh190,000; 1,800m
Winner: Good Trip, Tadhg O’Shea, Ali Rashid Al Raihe

FA CUP FINAL

Manchester City 6
(D Silva 26', Sterling 38', 81', 87', De Bruyne 61', Jesus 68')

Watford 0

Man of the match: Bernardo Silva (Manchester City)

Brief scoreline

Switzerland 0

England 0

Result: England win 6-5 on penalties

Man of the Match: Trent Alexander-Arnold (England)

Labour dispute

The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.


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