Sarb registrar Kuben Naidoo (right) speaks before parliament on VBS. File Image: IOL

CAPE TOWN – South African Reserve Bank (SARB) registrar Kuben Naidoo told the Standing Committee on Finance on Tuesday that VBS Mutual Bank was warned of its reliance on large deposits from municipalities. 

Naidoo said VBS knew SARB’s concerns but still continued with these dangerous practices. 

The registrar said in addition, concerns were raised on a number of other issues. 

These issues included: 

Deficient compliance culture

Weak asset and liability management

Potentially illegal municipal depositions

Poor quality in regulatory reports

10 largest depositors

The National Treasury then decided to instruct all municipalities to stop depositing large amounts of funds into VBS. 

VBS was warned about the issues in September 2015 and in September 2016, according to Naidoo, 

The bank continued their practices. 

“VBS was warned against reliance placed against the 10 largest depositors, with municipalities being the largest. VBS was alerted against the increasing sectorial concentration of municipalities and worsening liquidity mismatch positions,” Naidoo said Parliament.

In August 2017 SARB told VBS to get alternative liquidity, moreover the bank needed to create contingency plans as well. 

Naidoo said VBS did not heed the SARB’s warning or advice 

“Not only did they fail to heed our advice and reduce the risk that they were exposed to, they went in the opposite direction. We have asked them repeatedly to apply for a commercial banking license to allow them more scope than a mutual bank and to allow us more room for supervision,” he said.