VBS Mutual Bank ‘in its old form’ cannot be revived – SA Reserve Bank

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The VBS Mutual Bank “in its old form” cannot be revived, the South African Reserve Bank (SARB) said in a statement on Friday.

The Limpopo-based VBS was placed in liquidation by the high court in November 2018 after it collapsed following alleged looting of around R2 billion deposited into it.

There have been calls in recent weeks for the Bank to be revived. The Matsila Community Development Trust, acting on behalf of the VBS Shareholders’ Forum, formally wrote a letter to SARB earlier this year reiterating this call.

“Prior to its unceremonious collapse, VBS Bank served as a vehicle for socioeconomic development within the Vhavenda nation and adjacent communities. The demise of this bank has left a huge void in the lives of ordinary members of our communities,” the Trust wrote.

VBS licence ‘can’t be bought’

SARB however said in line with the ongoing liquidation, “collection on loans is continuing and assets are being sold to recover monies owed to depositors.”

It added, “The SARB has provided R261 million, covering over 97 percent of retail depositors who originally deposited with VBS Mutual Bank. To date, over 98 percent of deposit balances guaranteed by government have been claimed.  

“The banking licence under which VBS Mutual Bank operated was suspended. VBS Mutual Bank, in its old form, cannot be revived. The old VBS Mutual Bank banking licence cannot be bought by another party. The SARB cannot give that licence to someone else or to another entity.”

SARB said anyone can apply for a new mutual or commercial banking licence. Interested parties may also purchase VBS assets through the liquidator.

“They can also apply to use the name VBS or Venda Building Society, with the permission of the courts (and, in this case, the community involved). This process would be similar to the new licence granted to the resuscitated African Bank after the old African Bank was placed into curatorship in 2014,” it added.

However, a new banking licence application would have to go through the normal prudential and financial requirements, a process that could take up to two years.

SARB and Prudential Authority said they are ready to advise and guide applicants through this “long and complex” process. “We remain committed to ensuring a safe and sound financial sector that meets the transformational and financial inclusion objectives of government,” they said.

Political hot potato

VBS remains a political hot potato for the African National Congress (ANC), which controversially reinstated two senior Limpopo leaders implicated in the scandal. The two, Danny Msiza and Florence Radzilani, were cited in a report by Advocate Terry Motau, dubbed The Great Bank Heist, which investigated the alleged looting.

The report claimed Radzilani allegedly received R300,000 from the bank’s directors after Vhembe municipality deposited money there when she was the mayor.

Msiza was alleged to have used his influence to convince Limpopo mayors and municipal officials to “invest” hundreds of millions of rand in VBS. Both denied the allegations and had “stepped aside” from their positions for almost two years.

The hawks arrested eight suspects, many of them former VBS officials, in June on charges of racketeering, theft, fraud, corruption and money laundering.

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