Ithala Bank licence was suspended last week by the FSCA for failing to meet financial soundness requirements
04 September 2024 - 13:35
by ZIMASA MATIWANE
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Parliament’s standing committee on finance’s meeting with Ithala Bank regarding the suspension of its financial services provider licence got off to a slow, rocky start, thanks to the absence of the Treasury’s Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA).
On Tuesday the committee began its engagement with the bank and other stakeholders to address the challenges that have led to the suspension of its licence, but its work has been stifled.
“Regrettably, despite the significance of the meeting, no representative from the PA was present, limiting the committee's ability to address pertinent matters.
“No resolutions were made during today’s [Tuesday] sitting, pending the undertaking by the PA to send their representatives to [Wednesday’s] sitting,” said KwaZulu-Natal economic development, tourism and environmental affairs MEC Musa Zondi.
The committee said the Ithala Bank licence suspension deserves urgent attention in light of the continued viability of the bank and the possible negative consequences on depositors if the challenges are not resolved.
An apology letter regarding an oversight visit to Ithala Bank from the PA and the FSCA was received and rejected by the committee.
“The letter forwarded to the committee is unacceptable and has the potential of undermining the oversight work of the committee,” chair Joe Maswanganyi said.
“The reasons provided are inadequate and should have been raised in the meeting of August 27 where the resolution to undertake the oversight was taken.
The letter forwarded to the committee is unacceptable and has the potential of undermining the oversight work of the committee
Finance committee chair Joe Maswanganyi
“To ensure effectiveness of the oversight we are undertaking we need scientific outputs that talk to the challenges and how they will be resolved. While the committee acknowledges the matter is emotive and has the potential to affect millions of depositors mainly in rural areas, it is important that the response of the bank be meticulous and detailed to ensure effective resolution,” Maswanganyi added.
The committee also expressed concern about “the breakdown in trust and co-operation between the regulatory bodies and the bank” and cautioned the lack of collegiality will delay the implementation of measures necessary to ensure the continued existence of the bank.
The committee will reconvene on Wednesday and hopes to receive briefings from the PA and the FSCA as well as detailed plans from the bank on how it will resolve the challenges.
Ithala Bank is a KwaZulu-Natal-based state-owned development bank. Its licence was suspended last week by the FSCA for failing to meet the financial soundness requirements specified for financial services providers.
Ithala Bank previously operated with a banking licence exemption notice that lapsed in December after it failed to meet some of the conditions laid down by the PA.
The suspension of the banking licence means Ithala is prohibited from concluding any new business but is permitted to continue providing financial services for existing business.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Treasury snubs parliament in Ithala Bank talks
Ithala Bank licence was suspended last week by the FSCA for failing to meet financial soundness requirements
Parliament’s standing committee on finance’s meeting with Ithala Bank regarding the suspension of its financial services provider licence got off to a slow, rocky start, thanks to the absence of the Treasury’s Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA).
On Tuesday the committee began its engagement with the bank and other stakeholders to address the challenges that have led to the suspension of its licence, but its work has been stifled.
“Regrettably, despite the significance of the meeting, no representative from the PA was present, limiting the committee's ability to address pertinent matters.
“No resolutions were made during today’s [Tuesday] sitting, pending the undertaking by the PA to send their representatives to [Wednesday’s] sitting,” said KwaZulu-Natal economic development, tourism and environmental affairs MEC Musa Zondi.
The committee said the Ithala Bank licence suspension deserves urgent attention in light of the continued viability of the bank and the possible negative consequences on depositors if the challenges are not resolved.
An apology letter regarding an oversight visit to Ithala Bank from the PA and the FSCA was received and rejected by the committee.
“The letter forwarded to the committee is unacceptable and has the potential of undermining the oversight work of the committee,” chair Joe Maswanganyi said.
“The reasons provided are inadequate and should have been raised in the meeting of August 27 where the resolution to undertake the oversight was taken.
“To ensure effectiveness of the oversight we are undertaking we need scientific outputs that talk to the challenges and how they will be resolved. While the committee acknowledges the matter is emotive and has the potential to affect millions of depositors mainly in rural areas, it is important that the response of the bank be meticulous and detailed to ensure effective resolution,” Maswanganyi added.
The committee also expressed concern about “the breakdown in trust and co-operation between the regulatory bodies and the bank” and cautioned the lack of collegiality will delay the implementation of measures necessary to ensure the continued existence of the bank.
The committee will reconvene on Wednesday and hopes to receive briefings from the PA and the FSCA as well as detailed plans from the bank on how it will resolve the challenges.
Ithala Bank is a KwaZulu-Natal-based state-owned development bank. Its licence was suspended last week by the FSCA for failing to meet the financial soundness requirements specified for financial services providers.
Ithala Bank previously operated with a banking licence exemption notice that lapsed in December after it failed to meet some of the conditions laid down by the PA.
The suspension of the banking licence means Ithala is prohibited from concluding any new business but is permitted to continue providing financial services for existing business.
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