Sarb deputy governor Kuben Naidoo said in an affidavit that VBS could not account for nearly R1billion deposited with the bank.
In his response to VBS majority shareholder Vele Investment’s application to set the curatorship aside, Naidoo said the bank's failure to account for the money was a gross violation of banking laws.
“When Mr (Anoosh) Rooplal (the curator) commenced his duties on March 12, the liquid position of VBS Mutual Bank amounted to R24.7million.
"This is in respect of a bank which held total deposits ostensibly in the region of R2.9bn,” Naidoo said.
“I say ‘ostensibly’, because Rooplal has been unable to confirm the veracity of a material portion of the so-called corporate deposits, which amount to approximately R900m.”
Naidoo said it was uncertain whether all these corporate deposits represent “true” deposits. The bank is currently under the curatorship of Anoosh Rooplal.
The central bank last month placed VBS under curatorship after it “experienced increasing liquidity challenges over the last 18 months.”
Naidoo also accused VBS of paying brokerage commissions to entities to attract deposits, mainly from municipalities, a move it calls “highly unusual.”
He said VBS's problems emanated from a failure of the board of directors and executive management to manage the bank's rapid growth and its funding and liquidity position.
In its founding affidavit, Vele challenged the process the central bank followed that eventually led to it being placed under curatorship.
The firm said the curatorship of VBS was reviewable under the Promotion of Administrative Justice Act.
“The notification has not come from the minister (of finance) but from the registrar of banks.
"The notification required in section 69 (1) has therefore been exercised by a party not authorised by the empowering statute to give notice to the affected bank,” Vele said.
“It consequently lacks legality and rationality.”
Vele, which holds a 53percent stake in VBS, said it was surprised that the matter ended up in court. VBS’s second-biggest shareholder, the Public Investment Corporation, has thrown its weight behind the curatorship process.
The Banking Association of South Africa and the cabinet have also backed it.
Naidoo said among the anomalies the curator found was R1.8bn worth of assets reflected by means of a suspense account entry in the bank’s books. The curator has, however, failed to confirm that this entry constitutes real and tangible assets of VBS.
The curator also found out that nine of the 20 largest advances made by the bank were non-performing and these advances totalled R400m.
The curator further found that there was reluctance from the bank’s staff to follow-up on large clients who owe the bank money.
VBS came into the public eye when it infamously loaned R7.8m to former President Jacob Zuma to pay back the Nkandla upgrade money.
Naidoo said the curator had reason to believe that the bank was mismanaged by its executives and management.
"Rooplal is further of the view, based on his initial assessment, that there may have been fraudulent reporting and fraudulent transactions conducted in order to further the interests of certain key individuals and companies related to the bank," Naidoo said.
- BUSINESS REPORT ONLINE