Kuben Naidoo. Picture: FREDDY MAVUNDA
Kuben Naidoo. Picture: FREDDY MAVUNDA

The Reserve Bank had no option but to apply for the liquidation of VBS Mutual Bank once it had evidence that it was insolvent, deputy governor and Prudential Authority CEO Kuben Naidoo said on Wednesday.

There have been calls from several quarters, including from the EFF, for the bank to be salvaged.

EFF MP Mbuyiseni Ndlozi said that looking back at previous Reserve Bank interventions with troubled banks, it was the practice to try to save them. But this was not the case with VBS which the Bank, according to him, was hellbent on killing.

Parliament's finance committee has also stated that it wants VBS to be revived, and it regarded the collapse of the bank as a “severe setback” to transformation and diversity of the financial services sector.

Naidoo said in a presentation to the committee that VBS was “massively insolvent” to the tune of about R372m. A report on VBS found that massive fraud had been committed with about R1.9bn being looted from the bank.

The Reserve Bank applied on October 29 to court for the liquidation of the bank. The matter will be heard on November 13.

“In terms of the Mutual Banks Act read with the Banks Act, once the Prudential Authority has evidence that the bank is insolvent the Prudential Authority is legally obliged to approach the courts to apply for liquidation of the bank. We don’t have significant discretion on this matter,” Naidoo said.

He explained that the process of liquidation could take several years to complete. The process would entail recovering monies owed to the bank, selling assets and closing operations while continuing to collect on loans owed to the bank.

Naidoo believed that creditors could not hope to receive more than about 20c-30c on the rand once the liquidation was finalised.

“I am not optimistic we will recover a huge amount,” he told MPs.

“Our advice to anyone who wants to save the bank or provide similar services in the region is to use any financial resources that they have to apply for a new banking licence….this will be cheaper and will avoid the system and legacy problems associated with the old VBS.

“A new licensee may even apply to use the same name,” Naidoo said.

He insisted that the Reserve Bank did act on allegations made in September 2016 against VBS.

Advocate Terry Motau, who compiled a report on VBS, told the committee that his report was facing a legal challenge.

Finance committee chair Yunus Carrim insisted that he was not conflicted regarding VBS. This was in response to questions by the EFF that the SACP had received R3m from VBS Mutual Bank.

Carrim denied knowing anything about this donation and said SACP secretary-general Blade Nzimande and the party’s treasurer also did not.

DA finance spokesperson David Maynier said it seemed attack was the best form of defence for the EFF, which allegedly received money from VBS via the brother of its deputy president, Floyd Shivambu, who has also been accused of receiving money.