VBS ignored warning about relying on municipal deposits, Parliament told
Banks registrar Kuben Naidoo says VBS was first warned in September 2015 about relying on municipal deposits and again a year later when it had liquidity problems.
CAPE TOWN - Banks registrar Kuben Naidoo says VBS Mutual Bank’s board and management failed to heed Reserve Bank warnings about relying on deposits from municipalities.
Naidoo says the bank, which has been put under curatorship, continued to accept municipal deposits even after being told the practice was risky and possibly illegal.
He was briefing Parliament’s Standing Committee on Finance.
Naidoo says VBS was first warned in September 2015 about relying on municipal deposits and again a year later when it had liquidity problems.
But Naidoo says the advice was ignored.
“So not only did they not heed our advice and reduce the concentration risk that they faced, they actually went in the other direction. They increased the number of municipal deposits after the Treasury had issued their circular, both in terms of volume and the quantum of money.”
In his presentation, Naidoo referred to questionable governance and risk practices, saying the bank’s board and management failed to manage its rapid growth, its funding and liquidity.
WATCH: Capitec, VBS officials appear before the finance committee
(Edited by Zamangwane Shange)