The Prudential Authority (PA), the regulator of financial services that falls under the auspices of the Reserve Bank, has announced that Ubank has been placed under curatorship for failing to maintain adequate capital levels, as required by the Banks Act.
Ubank, which was formerly known as Teba Bank and traditionally serves customers in rural areas and mining communities, has a capital adequacy ratio of about 3% compared with an industry average in SA of just more than 15%, Reserve Bank governor Lesetja Kganyago said in a media briefing on Monday.
KPMG has been appointed curator under the supervision of the PA, with the firm’s representative during the process being Zola Beseti.
Retail depositors, who represent about 98% of Ubank’s total liabilities, will continue to have access to their money and banking services. Ubank will also continue to operate during the curatorship process, though the curator will have to make a decision on whether it will continue granting loans.
“The minister of finance, in consultation with the PA, has decided to place Ubank under curatorship with immediate effect,” Kganyago told journalists.
“This is being done to actively mitigate the consequences on Ubank’s depositors and to preserve the stability of the SA banking and financial services sector.”
Ubank has been providing basic financial services to mineworkers since the mid-1970s, a time when SA’s mainstream financial institutions largely ignored that segment of the market. Originally formed as Teba Cash Financial Services, it provided financial services to mineworkers ranging from remittance of funds to basic account facilities.
In the early 1990s, when SA was transitioning from apartheid rule to democracy, it changed from a savings fund to a commercial bank and eventually obtained a banking licence in June 2000 under its previous name of Teba Bank, though its ownership remained in a trust managed by trustees elected by the National Union of Mineworkers and the SA Chamber of Mines.
It changed its name to Ubank in October 2010, with a revised vision to become a retail bank.
Kganyago was at pains to point out that Ubank “will continue to be open for business” and that it remained highly liquid with a liquidity coverage ratio in excess of the regulatory requirement. Ubank’s total assets as of February 2022 were estimated at R5.23bn, while its net asset value was about R208m.
“This is a capital problem — there is enough liquidity in the bank to meet obligations to depositors,” he said. “The problem here is this is a bank that has eroded capital.”
Kganyago added that the PA intensified its supervision of Ubank over the past two years due to corporate governance concerns, internal control weaknesses and the difficulty in getting current or prospective new shareholders to inject fresh capital into the business. While the failure to secure additional capital led to Ubank being placed under curatorship, Kganyago said, “interested parties” continue to discuss investing in Ubank. If a deal was concluded, it would resolve the bank’s capital issues.
“The curator will take this process forward,” he said, adding that SA’s banking sector remained healthy and robust.
“There has been no indication that other SA banks have been negatively affected.”
Kganyago said the length of the curatorship process would depend on “how deep the hole” was at Ubank, which has more than 4.7-million accounts.
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