CAPE TOWN – The liquidation of VBS Mutual Bank will be of some benefit to its creditors and depositors, which include municipalities that invested in the bank as well as legitimate corporate and retail depositors, who deposited more than R100 000.
The Prudential Authority on Tuesday issued an application out of the High Court of South Africa for the entity’s liquidation based on findings in the forensic report published on October 16 that VBS Mutual Bank was factually and commercially insolvent and was unable to repay its debts against the background of massive frauds and the theft of depositor funds.
If successful, the liquidation of VBS will bring an end to the curatorship of VBS, which has been ongoing since 11 March 2018.
The curator of VBS, Anoosh Rooplal wrote to the Prudential Authority saying he was of the opinion that there was no reasonable probability that the continuation of the curatorship would enable the bank to pay its debt and meet its obligations and become a successful concern.
“In my investigation into the Bank’s 2017 year-end financial statements, I found wide-scale fraud and theft which had been perpetrated across VBS Mutual Bank leaving a related financial hole of some R1.8 billion. In the absence of a legitimate offer to salvage the Bank (as this in essence would be throwing good money after bad money to plug the financial hole), I had little choice but to recommend that the Bank be wound down,” wrote Rooplal.
The bank continues to collect monies due to it from loan account holders. Loan account holder contracts therefore remain valid and enforceable and loan account holders are urged to continue to pay their monthly instalments. This is required in order to avoid recovery action being taken against default payers.
The SA Reserve Bank earlier this year washed its hands of municipalities who deposited millions of rand in embattled VBS Mutual Bank as Nedbank stepped in to facilitate payouts to other depositors.
All retail depositors who have deposits of less than R100 000 in the bank, have full access to their funds through the facilitation of Nedbank since July 13.
The central bank said its deal with Nedbank covered 97 percent of depositors and that the municipalities would have to wait to see if there were enough assets at VBS to cover everybody if they hoped to get their monies back.
“Municipalities had no business placing deposits with VBS. They knew they were breaking the law, but they did it anyway,” said Reserve Bank governor Lesetja Kganyago.
Nearly 15 municipalities across the country are reportedly at risk of collapsing as it is unlikely that they will recover their investments at VBS estimated at R1.5 billion.
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