CAPE TOWN - The South African Reserve Bank (Sarb) says that the South African banking system remains safe and adequately capitalised.
This comes after the reserve bank on Sunday placed corporate finance and retail bank, VBS Mutual Bank under curatorship.
The retail bank has faced liquidity challenges for the past 18 months, said Sarb.
According to Sarb, failure from the board of directors and sizeable municipal deposits caused the insolvency of the corporate bank.
"The liquidity challenges emanated from the maturity of a large concentration of deposits from municipalities, and was exacerbated by the termination of other sizeable deposits and the inability to source sufficient funding timeously. It was highly risky for VBS to take sizeable municipal deposits that were short-term and lend them out long term. The liquidity challenges faced by VBS resulted in difficulty to settle its obligations in the National Payments System on several occasion", said Sarb.
- BUSINESS REPORT ONLINE