Johannesburg - The directors of the newly launched African Bank have distanced themselves from the controversy that surrounded the old African Bank, which was placed under curatorship by the SA Reserve Bank in August 2014.
“The Myburgh Report was commissioned by the Reserve Bank to investigate the affairs of the old African Bank and has nothing to do with the new African Bank that was launched today,” Brian Riley, the chief executive of African Bank, said. “All of the current directors at the new bank are newly appointed and have been vetted by the Reserve Bank in the ordinary course of making such appointments. We have no information as to when or if the Myburgh Report may be published.”
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Riley was responding to DA finance spokesman David Maynier, who raised concerns on the unpublished findings.
“We welcome today’s launch of the new African Bank. However, for more than a year details of the African Bank scandal have been swept under the carpet,” Maynier said. “The final report of the formal independent investigation launched into African Bank, in terms of section 69 (A) of the Banks Act (No. 94 of 1990), which was conducted by Advocate John Myburgh, has never been made public.”
Riley said the new bank was ready to function and was aware of the challenges ahead.
Tough climate
“There are several challenges that lie ahead and the current economic climate is a specific challenge. We know that we have a lot of hard work ahead of us, but we have a solid foundation and are set on our mission to deliver a successful retail bank. And over time (to) build a reputation and track record for the bank that confirms the decision to restructure and re-launch a new African Bank,” Riley said.
The bank said subordinated funders had offered to exchange their existing claims for a proportionate share of a new R1.46 billion 10-year, listed, subordinated debt instrument that qualifies as Tier 2 capital for the new African Bank in terms of Basel III regulations. These subordinated funders would also get a proportionate share of an upfront cash payment equal to a total of R165 million, less expenses and a subordinated “stub instrument” in the African Bank entity.
The new bank will provide a host of financial products, moving away from its previous business model of unsecured lending to include services such as financial advice.
36One Asset Management analyst Nico Smuts said: “Two of the factors that contributed to the demise of the old African Bank have been addressed by overhauling their accounting policies and tightening lending criteria. A weak economy, combined with looming interest rate caps and a rising regulatory burden means personal loans, which form the core of African Bank’s current product offering, are no longer as lucrative as before.”
The bank said its curatorship had said senior funders and other senior creditors would swop 100 percent of their existing claim against African Bank for new senior debt instruments issued by a well-capitalised and highly liquid “Good Bank”. This was equivalent to 80 percent of their existing claim, as well as a 10 percent upfront cash payment and a 10 percent stub instrument in the old African Bank entity.
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