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Warning signs for VBS were there, says economics expert

Reserve Bank Governor Lesetja Kganyago announced on Sunday that VBS had been placed under curatorship but would remain operational.

Picture: VBS Mutual Bank Facebook page

JOHANNESBURG – Questions are being raised about the manner in which management at VBS Mutual Bank operated and whether the crisis could have been avoided.

Reserve Bank Governor Lesetja Kganyago announced on Sunday that VBS had been placed under curatorship but would remain operational.

It was left cash-strapped after municipalities withdrew withdrew over a billion rand after it was declared under the Municipal Finance Management Act that they were forbidden from investing in mutual banks.

VBS was in the spotlight in 2016 after it serviced former president Jacob Zuma with a R7.8 million loan to pay for Nkandla.

Wits University's head of Economic Business Sciences Jannie Rossouw says the warning signs were there.

“It raises the question whether management should face legal charges for such contravention and this could have been avoided if VBS didn’t taken part by contravening legislation.”

Kganyago says VBS Bank applied for a banking license just over two weeks ago after municipalities withdrew their investments.

He says those investments amounted to over a billion rand, with the bank’s assets at just over R2 billion.

“The whole idea of putting banks under curatorship is because you believe that maybe it might just be salvageable.”

He says the withdrawal seems to have crippled VBS, leaving the Reserve Bank with no choice but to place it under curatorship.

Kganyago says that funds deposited into the bank remain safe but both VBS and municipalities broke the law as municipalities are compelled to only bank with registered commercial banks.

The current board and management of VBS have been relieved of their duties.

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