Municipalities banking with VBS high likely to lose funds, says Sarb

Efforts are meanwhile underway to help the thousands of people who invested their life savings in the bank, which was placed under curatorship after hitting a liquidity crisis in March.

FILE: Picture: VBS Mutual Bank Facebook page

CAPE TOWN - South African Reserve Bank (Sarb) deputy governor Kuben Naidoo says municipalities that deposited funds in VBS Mutual Bank are highly likely to lose a significant portion of their funds.

Efforts are meanwhile underway to help the thousands of people who invested their life savings in the bank, which was placed under curatorship after hitting a liquidity crisis in March.

Naidoo told Parliament’s Standing Committee on Finance that the reserve bank intends appointing a commission of inquiry into what went wrong and whether regulators were “asleep at the wheel”.

The deputy reserve bank governor put a question mark over whether VBS Mutual Bank can be salvaged, given what two months of curatorship and the forensic investigation that started in April has so far uncovered.

What is more certain is that municipalities that deposited funds in the bank may not get their money back.

“It is not within our powers to refund those municipalities the money. It’s an issue which the Treasury and Department of Cooperative Governance need to deal with. Even in an optimistic scenario where we are able to recover all the loans, it will take many years, seven to 10 years, to be able to recover all the money to be able to pay off the depositors and I stress that’s a highly unlikely scenario.”

Naidoo says they’re hoping to refund people with less than R50,000 deposited in the next few weeks.