DA and EFF want VBS investigation to include role played by Reserve Bank

Members of Parliament’s finance committee want the commission of inquiry due to be established into the collapse of VBS Mutual Bank to also investigate the role of the regulators.

Reserve Bank deputy governor Kuben Naidoo told the committee that it was the full intention of governor Lesetja Kganyago to establish a commission of inquiry to investigate, among other things, the fraud that was committed by the bank.

DA finance spokesman David Maynier and EFF chief whip Floyd Shivambu welcomed the proposed establishment of a commission of inquiry. But they suggested that it also probe the role of the Treasury and the Reserve Bank, which had failed to act expeditiously in addressing the problems at VBS Bank once they came to their attention.

"The impression that we have is that National Treasury and the Reserve Bank did not act certainly decisively for a period of 13 months and that is a huge concern. If there is a commission of inquiry, which we have been advised there will be, the role of the regulators and National Treasury should be examined," Maynier said.

Shivambu was concerned that the Reserve Bank was lied to about VBS Mutual Bank’s compliance with its capital adequacy requirement without checking this and that other banks might be acting in the same way.

Both Naidoo and Treasury deputy director-general Ismail Momoniat agreed that the commission should probe the role of the regulators.

"The commission will look at whether the regulator was asleep at the wheel," Naidoo said. "It is a legitimate question to ask whether the regulator dropped the ball. We should have a commission of inquiry to see where we erred, where Treasury erred and whether the legal framework erred and whether there was fraud."

Naidoo reported that VBS Mutual Bank had failed to comply with the Reserve Bank’s capital adequacy requirements for banks. The bank had a minimum capital requirement of R470m of which it was required to keep either on deposit with the Reserve Bank or invested in government bonds.

VBS had deposits in the national payment system of R120m and the remaining R350m should have been held in government paper or cash. "It was only on day one of the curatorship that we realised that there is nothing. Nothing. There is no capital. It is gone," Naidoo said. This was despite the monthly returns to the Reserve Bank that VBS was holding R470m to meet its capital adequacy requirement.

Naidoo said VBS Mutual Bank had been under intensive supervision by the Reserve Bank for about 18 months because of its liquidity challenges and its reliance on municipal deposits. Between September 2017 and March 2018 they increased the number and value of municipal deposits from R1bn to R1.5bn. "Again, the bank lied to us."

Momoniat said the commission should also look at other things such as the political pressure exerted by VBS Bank. He hinted that this was possibly because it was under the political protection of former president Jacob Zuma to whom it had provided a R7.8m home loan.

"There is no doubt that at one point VBS acted as if it was politically untouchable because they had protection," Momoniat said. The bank behaved in an unbelievably arrogant way as if it was politically untouchable "maybe because of who they loaned to", Momoniat said. Even MPs had lobbied to try to stop the curatorship.

"We are happy to admit that there were weaknesses. There were weaknesses in the system otherwise we would not have had the problem. But we should also look at the role of political pressure that also limits how agile or how quickly you act when you need to act."