The future of Postbank’s plans to become a fully fledged bank may be under threat as it stands to lose R3.5bn if the Post Office is placed in business rescue, while its deposits have no protection in law.
But even as it stands to lose far more money than it has provided for in financial statements, insiders do not believe its deposits are at risk, even as the Treasury told Business Day it does not guarantee them.
Postbank has just over R8bn in deposits and R3.5bn in assets, and according to court papers filed by the insolvent Post Office in support of its business rescue application, it is owed R3.9bn.
On Friday, the Post Office, which owes creditors, including the SA Revenue Service, medical aid, UIF, employees and landlords R9.4bn, applied to the Pretoria high court to be placed in business rescue to save it from liquidation. If business rescue goes ahead, the Post Office will pay creditors an estimated 10c for every rand owed.
In Postbank’s case, this amounts to roughly R390m being paid to it. This leaves the Postbank short of R3.5bn — the value of its entire assets, outside of deposits, according to its financial statements.
Before it took over the payment of grants, Postbank provided the Post Office with grant funding days before it was provided by the SA Social Security Agency as well and giving it an almost R1bn loan, which seems to be why so much is owed to it.
Some of Postbank’s more than R8bn deposits come from poor and rural people residing in areas where there are no banks and stokvels. This money is apparently untouched, but Postbank refused to answer questions about this cash, despite repeated attempts to get comment from it.
National Treasury told Business Day it does not insure any bank deposits, though this might change in 2024 when the deposit and insurance scheme comes into effect.
“Currently, no deposits held by any bank in the country, including Postbank deposits, are explicitly covered in terms of the deposit insurance scheme, as the deposit insurance scheme is not yet fully operational,” said the Treasury. “However, in the past National Treasury has provided depositor protection for depositors at licensed banks up to a maximum of R100,000, including African Bank, VBS and Habib Bank.”
This is done on a case-by-case basis with the finance minister’s consent.
Deposit insurance scheme
The Corporation for Deposit Insurance scheme comes into force in April 2024 and provides for a deposit insurance scheme to ensure bank deposits are explicitly covered in the event of a bank failure.
The Treasury says that to benefit from this, Postbank would need to be licensed as a fully fledged bank. But it is not clear Postbank will have the capital reserves to become a bank if the Post Office leaves it short of R3.5bn.
Postbank was instructed by the SA Reserve Bank to improve cyber security after having lost almost R100m to cybercrime since 2021.
The Postbank Amendment Bill is waiting to be signed into law by President Cyril Ramaphosa. It allows for the establishment of a bank controlling company to control Postbank and remove it from the bankrupt Post Office. This is part of legislative changes needed to enable Postbank to become a fully fledged bank. But its current financial standing may affect its ability to apply successfully for a banking licence.
In Postbank’s latest financial statements it has set aside R2bn not to be repaid, and not the full R3.5bn it stands to lose.
The Postbank losses concerned the Post Office provisional liquidators so much that they suggested an alternative process to business rescue, as Business Day previously reported. They suggested a compromise with creditors that would allow Postbank’s full claim of R3.9bn to be repaid so it would be able to meet the capital adequacy ratios required to obtain a banking licence. This does not appear to be likely given the Post Office’s request to be placed in business rescue.
The SA Post Office referred all queries to Postbank, which refused to comment.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.