Hilary Joffe Columnist

The Reserve Bank has put tiny VBS Mutual Bank under curatorship. The bank ran into severe liquidity trouble after it failed to act on repeated warnings that its dependence on unlawful municipal deposits put it at risk. The black-owned mutual bank, best known for the R7.8m home loan it granted former president Jacob Zuma in 2017, had continued to take deposits from municipalities, even after the Treasury warned six municipalities in August that it was illegal in terms of the Municipal Finance Management Act for them to bank with mutual banks, which have licences more limited than those of commercial banks, which have full banking licences. The Treasury’s warnings prompted some municipalities to pull their money from VBS, which by mid-February was facing a run on its deposits so that it no longer had enough cash to meet its payment obligations. That triggered the Bank’s decision on Sunday to put it into curatorship. Reserve Bank deputy governor Kuben Naidoo, who is also the registrar ...

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