DURBAN - The Governor of the South African Reserve Bank while addressing the annual Ordinary General Meeting touched on the VBS Bank debacle and said that responsibility lies with the bank and not with the regulator.
Letsetja Kganyago, the Governor of the Sarb, also said in his address that regulators cannot stop banks from failing if bad or illegal business decisions are made.
According to the Governor, criticism has aimed at the regulator for not noticing evidence of fraud and/or wrongdoing at the controversial bank before.
Kganyago also spoke the Sarb's role in relation to South African banks. He said, "It is not the role of the regulator to run the bank."
He added that the regulator’s role is to protect the depositors of the bank, not the shareholders, and to ensure that the bank complies to its prescribed prudential requirements.
In his address, the Governor said that it is the governance of the bank is the responsibility of the bank's board and that bank operations are in the hands of management.
As the regulators, Sarb has to rely on the accounts that have been handed to them as the basis of their risk assessment which will then be signed off by internal and external auditors.
Auditors cannot be held responsible if they are being misled however if they are complicit is in the irregularities then they will be held accountable.
Kganyago said that in March this year, they noticed signs of a serious liquidity crisis which was when the bank was put under curatorship with the goal of protecting the interests of depositors.
After this, the regulator launched an investigation into possible fraud and/or material misstatements. He said that financial statements are being restated and until that is complete they will not know how big the problem is. The Governor added that any evidence of misconduct will be handed to the relevant law enforcement agencies.
Due to the size of VBS Bank and its limited interconnectedness with the whole financial sector it is not expected to pose a systemic risk.
However, it did create it create challenges and anxiety for the people that stood to lose their life savings said Kganyago. Now, most of these deposits are guaranteed by the National Treasury, although corporate and municipal are not.
The Sarb did announce a mechanism that will repay retail depositors up to R100 000 of their deposits in VBS Bank.